A vehicle routing problem (VRP) isn’t a brand-new issue faced by businesses dealing with last-mile delivery. It goes back to the mid-20th century and was first described in the context of petrol deliveries. At that time, business managers along with mathematicians were applying manually calculated route optimization algorithms to find the most optimal set of routes for the fleet of vehicles.
But, nowadays, things have changed. Distribution networks have become more complex and customer expectations have been constantly growing. So companies started searching for more effective ways to solve a VRP and challenges it brings to a business. In this blog post, we’ll talk about how to do the route optimization right so it will allow you to reduce operational costs and increase the quality of delivery services. But let’s review some basics first.
- What is a vehicle routing problem?
- Common types of constraints related to the VRP
- Route optimization software that can help you solve the VRP
- Key functionality of the route optimization software
- Benefits of route optimization solutions
- Putting it all together
What is a Vehicle Routing Problem (VPR)?
A VRP is all about designing the optimal routes for delivering products to customers in different locations considering a number of constraints. It might seem easy at first sight — all you need to do is to find the shortest path between two points avoiding traffic jams and roadworks. But, actually, there are many more factors that have to be counted since the purpose isn’t just limited to delivering goods in the shortest possible time.
Businesses engaged in the logistics activity also strive to save costs, deliver the largest number of products to the largest number of customers while driving the least miles, increase the quality of services, and speed up all related operations. The complexity of the vehicle routing problem is caused not only by the availability of constraints but also by their ever-changing nature.
Let’s say you have 500 trucks and on average 3,000-4,000 delivery points every day. Of course, you can sit in the office for a few weeks to draw a perfect route plan for them. And it may even work but only if all conditions are stable. Is it a realistic situation? Well, no. Customers, their locations, and ordered products change on a daily basis. That’s why a system needs to be flexible. In practice, this means that it should be a state-of-the-art software solution that can perform the delivery route optimization in real time.
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Common types of constraints related to the VRP
Although the ultimate goals of all companies that regularly deliver the commodity to customers are similar, the needs and resources of every business are unique. For this reason, before choosing route optimization software for your organization, you have to realize, list and prioritize all the restrictions it’ll need to deal with.
Capacity constraints (CVRP)
Every vehicle has a limited carrying capacity, meaning that it can carry only a certain number of items that all together should not exceed the threshold weight and volume. The task is to design such a route that would allow a vehicle to pick up and/or deliver the maximum quantity at the lowest costs within the given capacity.
The capacity VRP may have different levels of complexity depending on the specifics of a company’s activity. For example, logistics service providers usually need to carry different types of cargo (e.g. food, devices, furniture) and the same truck may have a different maximum capacity for each of them. At the same time, online stores that sell clothes mostly deal with the products belonging to one category so the route optimization task is usually much easier for them.
Pickups and deliveries (VRPPD)
The VRPPD arises when a vehicle has to collect goods or passengers from a certain number of locations and drop them off at several destination points. So the main challenge is to transport all the items (or people) while minimizing the length of the route. Usually, no depot is involved since pick-ups and deliveries occur simultaneously.
For instance, this Vehicle Routing Problem is a common issue for on-demand taxi and delivery services. The system should quickly assign a vehicle to the pick-up. But before that it has to check:
- If such a vehicle completed its previous delivery and is available for the next one
- If, out of all available vehicles, this one can get to the pick-up point by the shortest path and, ideally, at the shortest time
For Uber-like businesses, having a reliable software system that can effectively solve the VRPPD is a mandatory prerequisite for growth and success.
Time window constraints (VRPTWs)
When it comes to vehicle routing problems with time windows, the main focus is put on ride scheduling. A software solution should consider not only the time periods when the visits to the locations must be performed but also the travel time between different destination points. The VRPTWs is a quite typical issue for companies which give their customers an opportunity to choose the time of delivery.
For example, we all know how irritating it is when a courier who had to come from 12 p.m. to 2 p.m. is still en route at 4 p.m. If they arrive before a time window opens, it’ll, of course, be a more beneficial situation for us as customers. But from the business perspective, both scenarios are equally bad since they mean that the company’s resources are used rather inefficiently.
The delivery of goods usually requires a lot of resources, from vehicles to driver working hours. If a company spends more of them than it’s minimum necessary for a certain operation, the business is losing its money. So the task is to build such a system that would allow an organization to deliver goods with the lowest possible amount of resources but with no compromises on speed and quality.
Resource constraints impact the VRP only indirectly, yet they play a crucial role in the effective work of the whole system. For instance, if a company has only one available loading dock and there are several trucks that need to be loaded at the same time, a queue is inevitable. This may lead to delays, customer dissatisfaction, and high operational costs.
Route optimization software that can help you solve the VRP
Implementing route optimization software in the company’s logistics processes is the fastest and the most efficient way to solve the vehicle routing problem of any kind. The good news is that there are a lot of available options nowadays. But you’ll have to do deep research to find a solution that will meet your specific requirements and fits your business best.
Standalone vs integrated system
Most fleet and transportation management systems contain integrated route optimization tools with some basic functionality. So if your business goes through a digital transformation process or you’re looking for a more holistic solution that would automate several transportation activities, it would be a nice idea to acquire such multifunctional software.
But management systems aimed at solving several logistics challenges also have their downsides. First of all, building or purchasing a complex solution will probably require more investments than opting for a standalone route optimization software. Secondly, fleet and transportation management systems are often stuffed with numerous default functions. If some of them remain unused (that is quite likely), they will just confuse your delivery managers and make their work harder.
Unfortunately, there is no one-size-fits-all option that would satisfy the needs of any business. To make the right decision, review the logistics processes of your company, calculate the budget, and consult with a professional business analyst.
Want to get more info about logistics solutions for your business? Check out this article!5 Best Software Solutions for Logistics Business
Off-the-shelf vs custom solution
This is another important choice you have to make in order to solve the VRP with the help of technologies. Ready-made software might be a good option if you’re still doubting exactly what functionality will satisfy your business needs. In such a case, using some off-the-shelf route optimization systems will help you get a better understanding of your requirements and features you want to have.
Here are some popular off-the-shelf tools for route optimization:
- Badger Maps
Alternatively, your development team may use OR-Tools which are open-source customizable Google tools for route optimization. Their implementation requires some coding but you’ll get a reliable solution that effectively handles all main VRP constraints.
However, if your business heavily relies on quality deliveries (e.g. logistics, food delivery, taxi, etc.), we would recommend building a bespoke software system. Custom development will probably require higher initial investments but they’ll definitely pay off in the end. On top of that, such a solution may be integrated with your existing enterprise systems so your entire business will be streamlined and connected.
Key functionality of the route optimization software
A route optimization solution — either ready-made or custom — will bring real value to your business only if it has the functionality that satisfies your company’s needs. This means that a feature-set should be the first thing you should pay attention to when choosing or deciding to create such software. To make this task easier for you, here’s the list of features most businesses want to have in their route optimization systems:
- Route planning
- Route cost calculation
- Activity & event tracking
- GPS integration
- Scheduling & calendar management
- Task assignment
- Advanced analytics
- Real-time dashboards for managers
- Third-party integration
- On-road vehicles performance tracking
Another crucial aspect of route optimization software is the ability to include vehicle restrictions and set customer preferences. It’ll help you solve the VRP more efficiently and increase the quality of delivery services. In general, the more constraints a system can solve the better.
Benefits of route optimization solutions
We have already mentioned some advantages of solving the VRP with route optimization software throughout the article. But let’s briefly summarize them here:
- Accuracy. In manual route planning, one minor mistake in calculations may lead to huge losses. Using software for this purpose eliminates the risk of human error so the results are more accurate and reliable.
- Cost-efficiency. Although the development of a software solution requires a certain amount of money, manual route optimization is much more costly. Hiring a person that can do such work full-time would cause you more expenses than custom creation of the most feature-rich system.
- Speed. Computer programs make calculations faster than humans. In addition, they can process more data and adjust results to the new conditions almost instantaneously.
- Increase in profits. Solving the VRP means that your vehicles will be able to transport more items in one go. This will improve your business productivity that usually leads to higher revenues.
- Enhanced satisfaction. Customers should be at the heart of any business. A route optimization solution will allow you to take the quality of your delivery services to the next level and boost customer satisfaction.
Putting it all together
A vehicle routing problem is a common challenge faced by many businesses. Although it might be solved manually, such an approach is not the best option in today’s fast-paced world. Modern supply chain and logistics processes are quite complex while customers always expect to receive high-quality services. That’s why you need to use technologies to meet all the requirements and deal with the main constraints. Develop a custom route optimization software and you’ll get a reliable, cost-efficient, and fast solution that will lead to higher profits and improved customer satisfaction.
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