Ultimate Guide to Route Optimization

Route optimization is about ensuring your driver’s journeys are as smooth and efficient as possible. But how does it actually work and when should you invest in delivery route optimization tools? We’ve put together everything you need to know about transportation route optimization below to help your business save time and money.

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What is route optimization?

Route optimization is the process of calculating the most efficient journey for a vehicle, based on numerous different factors. These factors include everything from the vehicle's capacity to road conditions or regulations.

To understand the challenge of route optimization, it’s a good idea to understand the vehicle routing problem.

What is the vehicle routing problem?

The vehicle routing problem is an optimization challenge with the goal of finding optimal routes for different vehicles visiting different locations.

Imagine you were a dispatcher and had to determine the order your driver should travel to five different customers. Easy, right? In fact, there are already 120 different solutions for this simple dispatching problem resulting in 120 possible combinations of multi-stop routes. If the number of customers triples to 15, the number of possible routes increases to an incredible 1.3 quadrillion.

This example is known as the "traveling salesman problem” (TSP), or in the transportation industry as the vehicle routing problem.

Whilst the vehicle routing problem is an interesting example, it doesn’t even include the complexity of the real world challenges. There are additional factors and restrictions that limit the number of possible combinations and add a lot of complexity to the delivery route planning process. These limitations might include:

Fixed delivery dates and assigned time slots at ramps
Customer wishes or restrictions at delivery location
Vehicle- and driver-specific equipment and abilities (e.g. temperature-controlled, hazardous goods, truck-mounted forklift, specific driver’s license of skill)
Driving and rest times or working time regulations
Combination of pick-up & delivery
Several depots

How does route optimization work?

When it comes to route optimization, there is never “one best route.” Instead, there are different options that serve different goals. For example, you may be aiming for the shortest distance (optimizing for distance), the fastest travel time (optimizing for time), or the overall cheapest delivery route (optimization for cost).

Given the complexities mentioned before, creating an efficient schedule manually is almost impossible after a certain volume of orders is reached. So how does it work? With the use of powerful algorithms and approximation methods, route optimization tools can solve vehicle routing problems at the push of a button.

What are the benefits of route optimization?

Reduce transport costs

Route optimisation ensures that orders are distributed efficiently among all vehicles. It considers the vehicles’ loading capacity and aims to load them as full as possible. Furthermore, it combines deliveries and collections, avoiding empty runs. This reduces mileage and fuel consumption and ultimately leads to lower transportation costs. Double-digit percentage transport cost savings can be achieved – the solution often pays for itself in just a few months.

Improved transparency & reliability

Route planning ensures consistency in service quality. Planning knowledge is no longer stored in heads, but in software and is visible to everyone. That ensures minimal disruption, whether a planner is on leave or a new fleet manager is hired.

Satisfied customers

Take special requests and requirements into account when optimizing routes and schedules. Automated notifications about the estimated time of arrival (ETA) improve customer service. And because planning takes minutes instead of hours thanks to the solution, the cut-off time can be pushed back to the customers’ advantage.

Reduce dispatching workload

Manual route schedule optimization keeps dispatchers busy most of the day. A software solution, on the other hand, completes these tasks in just a few minutes. This leaves planners more time for strategic tasks, spontaneous changes to planned routes, and driver support.

Compliance with regulations

Legal and industry-specific requirements are automatically taken into account with route optimization software. These include driving and rest times, company and contractual agreements, hazardous goods regulations, truck driving ban times, and environmental protection obligations.

Employee satisfaction

Good employees are hard to come by, especially in the logistics industry. That makes it all the more important to hold onto them and to keep them happy. With good route optimization, you can create realistic and feasible routes with little effort. This not only reduces stress and overtime work but also boosts the satisfaction of drivers and dispatchers, leaving them more time for other tasks.

Cut CO2 emissions

Optimized transport routes mean lower mileage and lower fuel consumption. This reduces your company's carbon footprint. With vehicle route optimization you can precisely calculate emissions for your entire logistics as well as for each customer with just a few clicks.

Free white paper: Route Optimisation Software

Digitization, competitive pressure and a shortage of skilled workers pose major challenges for the logistics industry. Route planning software can help companies work more efficiently, automate their planning, save costs and become more flexible.

In this white paper, you will learn:

Who benefits from route optimization software
How it can increase service levels and growth
How route optimization software assists planners
What to look for when choosing a software vendor (checklist included)

Free Download

Which industries does route optimization help?

From parcel services to supermarket deliveries, and from waste collection to scheduling field force staff - the possible applications of route optimization are diverse and by no means limited to the logistics industry.

Wholesale, manufacturing, medical services, field service, service technicians, delivery services, parcel carriers, waste disposal, and school buses - all transport goods or people and benefit from cost-based route optimization. Possible applications range from home delivery to distribution in short-haul and long-haul transport, last-mile delivery and local transport pre-and post-carriage to multi-day routes.

Some companies not only use route optimization tools to schedule journeys, but also to calculate and reduce the expected CO2 emissions. They forward the emissions balance sheet to their environmentally conscious customers or use it as a basis for compensation and offsetting measures. Even care services can benefit from route optimization software in their work.

How does route optimization impact company revenue?

Route optimization makes sure that your vehicles are always on the most efficient route. This enables you to take on more orders with the same amount of resources leading to a higher turnover.

Route optimization software increases the satisfaction of employees and customers. Dispatchers spend less time putting out fires and communicating delays to customers. Drivers don’t get stuck on unsuitable routes, face fewer unexpected delays along the way and don’t exceed their legal driving times.

Customers benefit from timely deliveries and – in case of delays – automated notifications. Thanks to automated planning, orders can be accepted and executed at much shorter notice.

All of this increases your profit without compromising the quality of your operations and service.

When should you invest in delivery route optimization?

If you experience any of the following challenges, then route optimization would be beneficial:

Your transport costs are increasing faster than your revenue
You’re struggling to meet delivery deadlines
You have a high turnover of drivers
Your planners spend a lot of time communicating delays to customers
Your customers complain about delays or long waiting times for orders

Investing in delivery route optimization tools helps you tackle all these issues. It enables you to reduce costs and usually pays for itself in a matter of months.

Learn How Global Logistics Companies Improve Revenue with Route Optimization

PTV Route Optimiser integrates functions that were previously done manually. It supports us in planning complex transport and distribution activities.

Giuseppe Galantuomo

Unilever Italy

We can now look at the whole system and work out how we could become more efficient.

Don Mackaness

SEQ Ice Cream

Installing PTV Route Optimiser paid off quickly. We're saving lots of money and planning time every month.

David Liebl

PDR Recycling

With PTV Route Optimiser, we can now calculate optimal routes and plan very quickly and above all, cost-effectively.

Raimund Müller

Okle

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PTV Route Optimiser is the most powerful route planning and optimisation tool on the market. It has unrivaled high-performing algorithms, can be tailored to individual needs and adapted to all common transport management, ERP, CRM, WMS and telematics systems thanks to standard interfaces.

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FAQs About Route Optimization

What is a delivery route?

Delivery routes are used by fleets of vehicles to deliver or collect goods or services. To create delivery routes planners typically:

assign orders to individual vehicles and routes
determine the sequence of stops within each route, and
define routes to be driven between the individual stops.

In the process of creating delivery routes, customer wishes, regulations and constraints must be accounted for. The goal of the planning process is to create an efficient schedule that uses all available resources efficiently.

What is route optimization in logistics?

Route optimization in logistics evaluates all possible combinations of journeys to produce a schedule that makes the most efficient use of resources available. The goal of route optimization in logistics is to identify the most efficient delivery route for multiple stops, while also accounting for all relevant restrictions, legal regulations and customer wishes.

Is there an app to plan delivery routes?

Given the complexity of delivery route planning, the use of custom solutions is needed to optimize routes and schedules. PTV Group has more than 40 years of experience in creating solutions for logistics and transportation. Take a look at our solutions for delivery route planning:

PTV Route Optimiser: Routing and scheduling that unlocks the full potential of vehicle fleets thanks to intelligent route optimization algorithms.
PTV Developer: The developer’s toolkit for customisable and integrable geocoding, map rendering, routing and other location service APIs.

What is vehicle routing and scheduling in logistics?

Vehicle routing and scheduling is essential to efficient logistics operations. Scheduling is the process of distributing orders or service requests to all available vehicles and employees, determining the sequence of delivery, and assigning specific time windows to each stop. Routing is the process of mapping out optimized routes for delivery drivers and service forces to get from one stop to the next.

What does routing mean in logistics?

Vehicle routing in logistics describes the entire process of planning and optimizing delivery routes for the vehicles in a fleet. The goal is to identify the most cost-effective routes that minimize the time and distance it takes to reach a number of stops with the available resources while accounting for other factors and constraints that impact the journey besides distance.

What are the objectives of routing & scheduling?

The objective of routing and scheduling is to ensure that all vehicles are on the most efficient route possible when delivering goods or services to customers. Thereby, routing and scheduling contribute to the optimal utilization of resources, minimize transportation costs, boost efficiency and profitability and facilitate the satisfaction of employees as well as customers.

Can Google Maps optimize a route?

Google Maps does not offer a truck-specific setting and is therefore not suitable to optimise routes for trucks. For example, its suggested routes include bridges or tunnels which are closed for trucks. This results in detours, loss of time, and higher fuel consumption. In the worst case, drivers go over the legal driving time or miss their time slots at delivery bays. Google Maps is not suited to schedule routes for fleets of vans or cars, because it can’t optimize schedules for many vehicles simultaneously.

Does route optimization only make sense for large organisations?

No, route optimization makes sense for any organisation. Even if you’re planning routes and schedules only for one or a handful of vehicles and customers, investing in optimization solutions pays off quickly. Which solution works for you depends on your size and IT infrastructure:

PTV Map&Guide: Truck route planning for small companies
PTV Route Optimiser: Routing and scheduling software for vehicle fleets
PTV Developer: APIs suitable for larger companies with a comprehensive IT infrastructure.

What’s the difference between static vs dynamic routing?

Routing and scheduling can be either static or dynamic: Static route planning works with fixed schedules, where the sequence of stops remains the same for any given day. These schedules are planned once – often manually – and then used for a long time.

Very few businesses can adhere to preset routes and schedules, and even if they can, it’s likely a waste of resources, money, and time. This is because static route planning can’t account for last-minute changes in routes, unforeseen traffic, human error and the many additional factors influencing a timely delivery.

Dynamic route optimization, in contrast, makes improvements and adjusts to risks and disruptions instantaneously. Dynamic route optimization is only possible when using the latest available technology, including real-time data.

The Ultimate Guide to Route Optimization in 2022