What Is Route Optimization?

May 3, 2022

The simplest way to define route optimization is that it’s the process of finding the best route for visiting multiple destinations. But what is the “best” route? In this post we’ll explain route optimization in more detail, talk about when and why it’s a good idea to use software to get the job done, and look at some real-life business examples.  

Table of contents

 

What is an optimal route anyway?

It might seem like the best route around a series of stops is simply the shortest route. That’s true if you’re trying to draw the shortest line that joins all the dots on a piece of paper – but the real world is not a piece of paper! 

Graphic showing a simple optimization that joins dots with straight lines.The most basic route optimization finds the shortest loop that visits all the stops exactly once. If you have more than one vehicle, the solution is different.

For one thing, in the real world we travel along roads, not in straight lines. And roads come with traffic, bridges, tunnels, tolls, one-way sections, speed limits, parking restrictions, and many other factors that affect how suitable they are for traveling and stopping.

Then there’s the fact that “shortest” is not always best. Depending on what a business needs, the optimal route might be the one that:

  • Take the least time. 
  • Uses the smallest number of vehicles.
  • Costs the least money.
  • Minimizes fuel use or carbon emissions.
  • Or, yes, covers the shortest distance.

Finally, an optimal route also needs to needs to work with constraints like:

  • Delivery time windows: for example, customer A needs their delivery before noon while B doesn’t want it before 3 pm.
  • Vehicle capacities: how many units can each vehicle take?
  • Vehicle types: for example, some loads are only suitable for refrigerated vehicles and cargo e-bikes may be able to use bike-only routes.
  • Driver territories: do your drivers need to stay within particular areas? 
  • Driver schedules: when and where do drivers start their routes, when do they get breaks and how much overtime is allowed?

Humans vs algorithms: reaching the limits of manual route planning

Taken all together, these factors make route planning very complex indeed. And yet, up to a point, humans are remarkably good at solving routing problems, especially experienced planners who know their city, their fleet, and their drivers well. A human planner will be able to juggle business priorities, make tough decisions when there are conflicting priorities and work with information that’s not in the routing database.

There’s a limit to what humans can do though. The more stops you need to make and the more vehicles you have, the more difficult and complicated it gets to plan a route:

  • With 10 destinations, there can be more than 300,000 ways to connect them all. 
  • With 15 destinations, the number of possible routes could exceed 87 billion.
  • With 50 destinations, the number of possible routes is a ridiculous number – 1075 or a quattuorvigintillion. To put that into context, astronomers estimate the total number of stars in the universe at between 1022 to 1024

Animated gif showing shifting lines and clusters of colorsIn this animation you can see an example of route optimization in action. Each dot is a stop, with different colors representing clusters of stops allocated to particular vehicles or drivers. At the beginning, there are lots of black dots representing unscheduled stops. The algorithm first shuffles stops between vehicles to schedule everything, while ensuring all vehicles carry similar loads. Then it fine-tunes by comparing and optimizing between neighboring clusters. 

In the real world, of course, the real number of possible routes is less than the theoretical number — but it’s still a lot! Now add in all the constraints we mentioned earlier, and humans quickly hit their limit. Planning starts to take too many hours, routes become costly, and customer service may suffer. That’s a good time to consider adding route optimization software to your business toolkit.

💡  Fun fact: Route optimization is a good example of how solving abstract mathematical problems can have real-world benefits.  In this case, the two most famous are the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP). These are complex problems that mathematicians and computer scientists have been trying to solve for years.

How do you know when you need route optimization software?

Many delivery businesses start out small, with manual route planning and free tools like Google Maps. But as they scale, they start to outgrow these tools. In general, we’ve noticed that route optimization software starts to add value once a business needs to plan for around 20-30 stops a day, or needs more advanced delivery management features like customer notifications. 

Some signs that it’s time to try a route optimization solution are:

  • You’re spending hours each day planning and dispatching your routes.
  • You only find out about late or missed deliveries when a customer contacts you to complain.
  • Your customers keep contacting you to ask about the status of their delivery.
  • You’re concerned about how much you’re spending on fuel and driver wages.
  • You want to reduce carbon emissions from your vehicles.
  • Your delivery operations feel messy and inefficient.

Route optimization software will allow you to handle complex scenarios that include:

  • Multiple routes with many stops on each route.
  • Planning for delivery time windows, driver schedules, vehicle capacity, and more.
  • Easily adjusting routes to use fewer vehicles, take less time, or reduce the distance traveled.
  • Re-optimizing fast when last minute changes happen.

Two graphics of a street map, showing both optimized and un-optimized routes around the same set of stops. The optimized route is visibly more efficient. Two gauges below show shorter time and lower fuel consumption.

Route optimization can save both time and fuel costs.

Route planning software designed specifically for delivery businesses often comes with additional features like:

  • Delivery time estimates and status notifications
  • Driver apps.
  • Live GPS tracking of drivers.
  • Proof of delivery.

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Who is route optimization for?

Route optimization is for any organization that needs to visit many destinations in a single day. The most common users are:

  • Last-mile delivery services
  • Organizations that make deliveries
  • Organizations that make sales or service calls

In the next section we’ll showcase two real-life stories — one small home delivery business in the U.S., and one up-and-coming courier service in the Netherlands. 

Real-life route optimization stories

Routific is available in two forms. Small businesses who make their own deliveries tend to use our standalone web app to plan and optimize their route, manage their drivers, and stay in touch with their customers. The first story here is about one of those users, a small local farming business. Larger companies who build and manage their own last mile delivery software platforms, like Trunkrs which is featured in our second story, tend to use our Engine API to handle their route optimization. 

Terra Firma: A local delivery business

Terra Firma Farm is a small livestock and poultry farm in Connecticut, USA that produces dairy products, beef, heritage breed pork, poultry, and rabbits. Farmer Brie Casadei used to sell mainly via a farm stand, at farmers’ markets, in local grocery stores, wholesale to restaurants, and via a food co-op. Like many other businesses, when COVID hit they had to quickly adapt to online sales and home deliveries, which Casadei admits was “a huge struggle in the beginning”.

 

Fortunately Casadei discovered Barn2Door, an online marketplace that connects local farmers directly to customers and helped her develop her website and online ordering system. She and her team started delivering just one day a week to customers within a 15-mile radius of the farm, with curbside pickup on another day. Soon, however, “we got flooded with requests to add new towns and new stops.” The farm now delivers within a 30-mile radius six times a week, with curbside pickup twice a week. Total deliveries increased from 80 to nearly 1,000 a month.

This growth was made possible by Barn2Door’s integration with Routific’s route optimization software, which Casadei credits with saving not only “unreal” amounts of time but also 35% on the farm’s fuel costs. Additional delivery management features like customer notifications have also helped her maintain the personal touch with her customers even as the business has expanded.  

She notes that this is especially important because “big corporations like Amazon have trained our customers to expect easy deliveries. If we can offer them convenience they’ll keep coming back.” 

Read more about Terra Firma in our customer story.  

Trunkrs: An up-and-coming courier

Dutch delivery company Trunkrs started in 2015 with a vision to take the pain out of e-commerce deliveries. Co-founder and CTO Hidde Stokvis started out building their entire tech platform from scratch, including his own routing algorithm. But he soon realized that maintaining an algorithm wasn’t the best use of his limited time and engineering resources.

“We spent a year and half working on our own algorithm,” said Stokvis. “Then we started growing really fast, and we saw that our in-house solutions weren’t fit for our growth.” As delivery volumes scaled, the algorithm was getting exponentially slower. At some point, it was taking hours to generate results, leaving drivers waiting around with no scheduled deliveries even as orders piled up.

A woman in a green Trunkrs overall taking a package off a shelf in a warehouse.Trunkrs has maintained 98.6% on-time deliveries.

In addition, said Stokvis, the quality of the results he was getting from his algorithm was “not very good. It worked in some situations, but when you have a lot of rivers and bridge crossings [like in the Netherlands], it just didn’t work for us anymore.”

In 2017 Trunkrs integrated Routific’s Engine API and saw rapid improvement. Routific was able to give better, faster routes in a shorter amount of time, giving Stokvis and his team time to focus on building other parts of their tech stack. 

By 2021 their delivery volumes surged, with an astonishing 3,459% growth rate in 2020 – yet they have maintained 98.6% on-time deliveries and a 4.8-star Trustpilot customer rating based on over 16,000 reviews.

“Routific’s algorithm is constantly improving and can handle a lot of volume with very fast processing times,” said Stokvis. “So we actually are growing in parallel quite well. Routific has been super stable.”

You can read more about Trunkrs in our case study.

What to look for in route optimization software

There are many route optimization solutions in the market, so it’s useful to know what to look for when you’re evaluating the options. You can also read our detailed review of individual delivery route planning software, if that helps your research.

The most important things a route optimization solution needs to deliver are:

Flexibility

As we’ve noted, the optimal route for your needs is the one that works with all your business constraints. Last-mile delivery businesses have different needs than those that make sales or service calls, for example. Choose an option that caters to your particular use case.

Accurate ETAs

If deliveries run late you need to deal with angry customers as well as possible driver overtime payments. Route optimization software needs to deliver accurate travel time estimates based on factors like historical traffic data.

Ease of use

Route optimization software should be easy to use, with a map view that makes it obvious which stop is allocated to which driver, and how each route is progressing through the day. A driver mobile app that makes it easy for drivers to receive their routes has also become a must-have feature. 

Speed

As Trunkrs discovered, having a route optimization algorithm doesn’t help if it takes too long to do the optimization. The right software for your business needs to be able to optimize all the stops you need, fast, every day — and to handle more stops as your business grows. It should also allow you to re-optimize to accommodate customers who place last-minute orders. 

Efficient routes with high driver acceptability

You want routes that are not only efficient, but also clean and non-overlapping. If the routes don’t make sense to your drivers (for example, if two stops on the same block are allocated to different drivers) they won’t be eager to drive them. You may lose efficiency gains as a result.

Accurate geocoding

Geocoding is the process of converting an address to a map location. If it’s not accurate, drivers are sent to the wrong place, causing frustration, hassle, and extra cost to everyone.  Software should be smart enough to flag any uncertainties for you to review before dispatch. 

An easy-to-integrate API

If you’re a courier company or other business that prefers to build its own delivery management platform, you’ll need a route optimization API. In addition to all the features we’ve already mentioned, look for something that comes with good documentation and is easy to implement. 

Screenshot of Routific dispatcher viewRoute optimization software should offer an easy-to-understand map view that shows
exactly how each day’s deliveries are progressing.

The bottom line: Humans are great at optimizing routes, until they aren’t. When the size of the routing problem gets too big for the human brain to handle, route optimization software can help to keep a business running smoothly. It can also save a lot of time and money: with a good routing algorithm, you can expect savings of 20% to 40% on fuel and drive time.

 

Pam Sykes

Written by Pam Sykes

Pam Sykes is the Lead Content Strategist at Routific, a delivery management & route optimization solution that helps local businesses and last mile companies scale up deliveries.