Vehicle route optimization

Vehicle Route Optimization: Modern-day Challenges & Solutions


By Komal Puri | March 4, 2024


Definition of Vehicle Route Optimization:

In the context of logistics and supply chain, vehicle route Optimization refers to finding the most optimzied path for delivery vehicles to ensure they can cover maximum distance within a minimum duration leading to time and fuel cost savings. It is aimed at maximising stops per trips and as a result, increased deliveries.

Importance of VRO in Modern Logistics & Transportation

The cost pressures in logistics are increasing largely due to rising fuel and labour costs. Hence, it is imperative for businesses heavily driven by logistics to remain cognisant of this. This means they have to optimize usage of fuel and fleet judiciously. This leads to identifying areas where they could potentially optimize operations. Vehicle route Optimization emerges as a key area where they need to focus on. This has several benefits, the biggest one being reduced cost per delivery. This can on one end boost profitability while on the other end be passed on as an advantage to customers in the form of free or discounted deliveries.

Brief Overview of Challenges in Route Planning

A lot of variables affect route planning operations, some of which include:

  1. Number of vehicles

  2. Number of drivers

  3. Number of orders to be delivered

  4. Order density per locality

  5. Sequence of deliveries

  6. Times of deliveries - If per-selected

Given the complexities and the dynamic nature of each of these variables, it is a rather challenging operation to be performed manually. Often times, planners leverage tribal knowledge of drivers to design routes. However, like in any other manual operation, there is a lot of scope for inefficiencies and errors.

In addition to these constraints, there are some more that are depending on the route itself that include:

  1. Route congestion

  2. Route restrictions

  3. Blockages

  4. Route diversions

These factors have a more real-time impact on route planning and a sophisticated tool that can dynamically modify planned routes, to ensure effective Optimization and SLAs is crucial.

Significance of Vehicle Route Optimization

Here are some of the reasons explaining the significance of vehicle route optimization.

Cost Savings Through Fuel Efficiency

The most important reason to have effective route optimization for vehicles is to reduce fuel expenses. With rising fuel prices and its impact on the total cost of operations to excecute deliveries, a savings in fuel costs tends to have an automatic impact on the total cost of delivery itself.

Reduction in Travel & Improved Delivery Timelines

By optimizing routes, drivers can reach their delivery destinations faster. This ensures that delivery SLAs are maintained. It also ensures that more orders per trip are possible, thereby resulting in a win-win for drivers, due to better incentives and customers, with faster services.

Minimizing Carbon Footprint & Reduction on Environmental Impact

A reduction in miles traveled is a reduction in fuel burnt and reduced vehicular pollution. This is a positive step towards sustainability through reduced carbon footprint.

Enhancing Overall Operational Efficiency

With effective VRO, businesses can improve on-time delivery performance, vehicle utilization, fleet capacity utilization and reduce fuel costs. Overall, they can bring down their cost of deliveries. This improves the overall operational efficiency of delivery operations.

Understanding Vehicle Route Optimization

Basics of VRO Algorithms

The source location remains the same while the destination consists of many locations. The route planning needs to factor in time windows and resource constraints. The sequence and routes for delivery play a major role in ensuring optimized utilization of the fleet to maximize deliveries and at the right time.

In addition, provisions need to be made to take real-time conditions into account to not waste time and fuel in idling.

Factors Influencing Route Planning

The key variables that affect Vehicle Routing are:

  1. Order parameters - Size, Weight, Dimension, Date of delivery

  2. Route parameters - Density, Real-time factors, Restrictions

Size, Weight & Dimension and Route Restrictions - For small packages, this may not be all that significant but if it is a large package, like in the case of furniture deliveries, this plays a major role. In this case, there are a couple of more factors such as ‘route restrictions for large vehicle movement’, ‘preferred time slot for deliveries by customers’ etc. play a major role.

Delivery window preference - When customers choose their time of delivery and have a set preference, it is critical for route planners to factor it while dispatching to ensure a good customer experience.

Real-time traffic conditions - Reducing idling time at stops and signals is important to ensure fuel efficiency. This can significantly increase total cost of operations. As per live traffic conditions, the VRO algorithm needs to be able to re-route vehicles to reduce idling time.

Role of Technology in VRO

Modern-day routing tools are capable of factoring in all the above mentioned parameters while generating routes. For starters, they have the ability to generate routes in minutes as against hours that it would take manually. They have cutting-edge machine learning capabilities that learn faster than humans and incorporate them into the planning. This ensures a continuous improvement in accuracy and forecasting.

Challenges in Traditional Route Optimization

Manual Route Planning Limitations

This is a time consuming process. This involves consolidating all orders for the day, manually looking up the addresses and then mapping the routes before assigning them to drivers. This traditionally takes hours and leads to long wait times for drivers before they can get their day plans. This leads to fewer hours on the road and reduced number of deliveries. On one end while this is inefficient, it is also error-prone.

Inability to Adapt to Real-time Conditions

While planners may have made some assumptions based on experience, real-time factors such as traffic and restrictions in vehicle movement can have an impact on the SLAs. There needs manual intervention which is largely reactive and not proactive. This is a sure shot way to miss deliveries as per the plan and leads to new complications that include re-scheduling deliveries. This is not just complex but also costly.

Lack of Optimization

Traditional routing typically follows the same process and there is little room for innovation or improvement. It is largely a catch-up game where there’s no room to make it more efficient or optimize.

FarEye’s Role in VRO

FarEye has state-of-the-art routing capabilities that are leveraged by 100s of enterprises worldwide to ensure their deliveries happen on time and are efficient. Here is a brief overview of its capabilities.

Overview of Key Capabilities in Routing

Dynamic Route Planning

FarEye’s routing engine is capable of routing static, dynamic and real-time dynamic scenarios. This is perfect for all kinds of use-cases ranging from milk run to hyperlocal.

Real-time Monitoring and Tracking

FarEye provides full visibility into the execution of deliveries on planned routes. This helps identify deviations and take decisions to ensure that operations are optimized and SLAs are met.

Adaptive Optimization

With technology like loop optimization, the engine adapts to real-time scenarios while also leveraging the familiarity drivers may have out of sheer experience to sharpen the accuracy of routing. This helps a long way in ensuring that routes get optimized on a continuous basis.

Machine-learning Capabilities for Predictive Analytics

FarEye has a state-of-the-art machine learning engine that is highly effective in predicting situations and factoring them while routing. It also is continuously learning about traffic patterns, routes, drivers and using all of this information to generate optimized routes.

Case Studies Demonstrating FarEye’s VRO Capabitlities

While there are several success stories to demonstrate FarEye’s routing capabilities, here are a selected few.

Gordon Food Services, a leading food services company for over 100+ years could adapt to the changing needs of the instant-gratification seeking modern-day consumer. They could commit to 3-hour deliveries and ensure the SLAs were met, thereby aceing same-day deliveries by using FarEye’s route planning.

Super Indo, a leading retailer in Indonesia could reduce dispatch time by about 30% using FarEye’s auto-routing, thereby boosting overall efficiency of operations successfully.

How FarEye Solves VRO Challenges

Addressing Real-time Changes and Uncertainties

FarEye has natively built capabilities to address real-time changes to situations dynamically. This includes order allocation in real-time, dynamic routing and also the ability to improve collaboration amongst managers, drivers and customers which sets right expectations and communication channels which are critical.

Adaptive Optimization for Dynamic Scenarios

Whether it is re-routing fleet based on traffic conditions or combining pickups while fleet is returning empty, the ability to adapt depending on the scenario sets FarEye apart. It intuitively helps businesses foresee situations and gives a relief from reactive firefighting.

Seamless Integrations with Other Logistics & ERP Systems

By seamlessly integrating with other systems like ERP, WMS and OMS platforms, there is a smooth flow of orders and there is hassle-free consolidation. This ensures all orders irrespective of channel get routed to meet particular SLAs.

User-friendly Interface For Efficient Planning & Monitoring

FarEye is easy to use and has a simple user interface both on web and mobile. This makes the lives of all stakeholders much simpler and is critical to stick to operational plans especially when there are tight constraints. It is easy to onboard even new drivers and train them quickly, thanks to the interface, that gives businesses adequate leverage and more time on roads to maximise productivity.

Komal puri

Komal Puri is a seasoned professional in the logistics and supply chain industry. As the AVP of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.

Komal Puri
Sr. Director of Marketing | FarEye

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