How Route Optimizing Works and What It Means for Courier Services

Editor's Note: Take a look at our featured best practice, Trucking / Delivery Business Financial Model (Excel workbook). If you are trying to validate your trucking business (or a general delivery business), this 5-year financial model is just the right tool. These assumptions were specifically designed to meet the needs of a trucking business whose primary revenue stream is from making deliveries. Here is a [read more]

Also, if you are interested in becoming an expert on Supply Chain Management (SCM), take a look at Flevy's Supply Chain Management (SCM) Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

* * * *

Route optimization helps courier services to determine the most efficient routes possible for reaching their destinations, and is used in all types of courier and delivery industries, including logistics, transportation, and last mile delivery services.

One of the primary benefits of route optimization is a cost reduction in incurred expenses from time spent traveling, including driver hours, fuel costs, and needing less fleet. It’s said that advanced routing optimization software can reduce transport costs by 10–30 percent. This is significant for an industry where fleet maintenance costs an average of $5,000 to $8,000 per year, annually.

In this article, we’re going to explain how route optimization software works, and the benefits it offers to courier services, whether it’s large-scale operations, or a local courier business you’re launching in your hometown.

Why Not Just Use Google Maps?

Rideshare services like Uber and Lyft drivers may be able to use standard GPS platforms like Google Maps, because they are individual drivers, and are typically just using the free GPS mapping apps available to everybody.

This works for the average driver, and even for ridesharing services where individual drivers are concerned, but it does not offer all the features you’d want in a specialized, commercial route optimization software, such as predicting the shortest route for multiple destinations in a hassle-free way.

For large-scale industries such as courier and logistics, Google Maps API also has significant limitations on the amount of requests sent per 24-hour period, and you will end up paying for anything that exceeds the quota of your Google Maps APIs for Work license.

How Route Optimization Works

In order for a courier service company to successfully employ route optimization, it must first compile a database of all of its business routes. Route optimization software will then use the provided data to predict the most efficient routes. This involves the simulation of various scenarios, based on Vehicle Routing Problems (VRPs).

These VRPs will typically include, but are not limited to VRPs with:

• Time windows
• Pickup and delivery
• Vehicle cargo capacity
• LIFO
• Multiple trips
• Team orienteering

Route optimization software will predict these routes using route optimization algorithms, which can be powered by sophisticated machine learning and AI models.

What Route Optimization Offers to Courier Services

Courier companies have a difficult workload, in that they must maintain overhead and business expenses including wages, taxes, vehicle maintenance, and more. As mentioned earlier, route optimization software helps to significantly reduce some of those expenses, primarily by reducing travel time in a major way. Because it all goes hand-in-hand, cutting vehicle travel down by 20 – 30% equals fuel cost savings in the same ballpark figure.

Aside from reduced costs, route optimization software also saves the company time, particularly in planning and coordination. Planning deliveries can take hours of strategizing when you need to account for traffic, weather, construction, the number of stops, and other factors that can ultimately increase the amount of time spent in planning.

If you have a database of addresses that your courier service needs to make deliveries to, you just import that database into the routing software, and typically you’ll have the most efficient results in less than a minute.

Of course, you may still run into the problem of drivers being unfamiliar with locations, which is where GPS comes in handy. Routing software typically features real-time GPS that is not only viewed by the delivery driver, but can also be viewed by the dispatchers as well. This allows you to make sure your drivers are on the correct path, and are sticking to schedule.

If you have a small business or you would like to expand your business to a bigger one, you can hire MS Dynamics developers.

Not everyone knows how to use this which is why if you are planning to have this technology, you need professionals who can provide Hybris consulting.

Want to Achieve Excellence in Supply Chain Management (SCM)?

Gain the knowledge and develop the expertise to become an expert in Supply Chain Management (SCM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

Supply Chain Management (SCM) is the design, planning, execution, control, and monitoring of Supply Chain activities. It also captures the management of the flow of goods and services.

In February of 2020, COVID-19 disrupted—and in many cases halted—global Supply Chains, revealing just how fragile they have become. By April, many countries experienced declines of over 40% in domestic and international trade.

COVID-19 has likewise changed how Supply Chain Executives approach and think about SCM. In the pre-COVID-19 era of globalization, the objective was to be Lean and Cost-effective. In the post-COVID-19 world, companies must now focus on making their Supply Chains Resilient, Agile, and Smart. Additional trends include Digitization, Sustainability, and Manufacturing Reshoring.

Learn about our Supply Chain Management (SCM) Best Practice Frameworks here.