A vehicle routing problem (VRP) isn’t a brand-new issue and phenomenon, certainly not for 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 seen constant growth. So companies started searching for more efficient ways of solving VRP and the various challenges it poses to businesses. In this blog post, we’ll talk about how to execute the route optimization right so it will allow you to reduce operating costs while simultaneously improving the quality of your delivery services. But let’s review some basics first.
What is a Vehicle Routing Problem (VPR)?
A VRP or Vehicle Routing Problem is all about designing the optimal routes for delivering products to customers in different locations considering several 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 amount of 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, increasing the quality of services, and speed up all related operations. The complexity of the vehicle routing problem is caused not only by the presence of constraints but also by their ever-changing nature.
Look at a visualization of what vehicle routing problem in the video we added below.
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 scenario? Well, the short answer is – no. The somewhat more detailed answer is that customers, their locations, and the products they order change daily. That’s why a system needs to be flexible to accommodate those tweaks and make adjustments. In practice, this means that it should be a state-of-the-art software solution that can perform the delivery route optimization in an automated fashion in real-time.
Common types of constraints related to the VRP
Although the ultimate goals of all companies that regularly deliver commodities or products to customers are similar and have definite commonalities, the specific needs and resources vary from business to business, making every business unique in its own right and way. For this reason, before choosing a route optimization software for your organization, you’ll have to realize, list, and prioritize all the restrictions limitations it’ll need to deal with and workaround.
Capacitated vehicle routing problem (CVRP)
Every vehicle has a limited carrying capacity, meaning that it can carry only a certain number of items at once that all together, on aggregate, mustn’t 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 specification depending on the category or type of goods being carried. At the same time, online stores that sell clothes mostly deal with products belonging to one category so the route optimization task is usually much more straightforward for those who are tasked with transporting garments.
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 sequentially.
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, in the shortest amount of 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 the ride schedules. A software solution should consider not only the periods when the visits to the locations must be performed but also the travel time between different destination points. The VRPTWs is quite a typical issue for companies that allow their customers 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 wasting its resources/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 without compromising on the speed and quality of the delivery.
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 several trucks need to be loaded at the same time, a queue is inevitable. This may lead to delays, customer dissatisfaction, and high operating costs.
Example of vehicle routing problem
Let’s look at an example of one of the most widespread vehicle routing problems that many delivery companies face every day. Imagine a delivery company that counts thousands of customers that live in completely different locations.
Let’s say this company specializes in delivering diverse goods like documents, medications, products, etc. It sounds quite challenging as this company is tasked with providing an excellent customer experience for each of their customers and deliver orders in time, safe and sound. It means that this company requires at least 400 drivers that are spread across different locations by particular groups, splitting responsibilities between the workers and assigning orders to their transport based on such factors as location, type of transportation, and how busy the driver is. Hence, it is a really hard task to track each carrier, explain their destinations, check if each order is completed and in one piece, monitor the shipment process, keep customers informed about the order status, and many other vital details that matter.
Here comes a need for an all-in-one software solution where all data about deliveries would be digitized, organized, and automatically updated. Additionally, carriers would need a mobile application where all the latest important information about orders and destinations would be readily available at any time. Thus, this app could be accessible for customers to track order status and remain informed about the estimated time of delivery.
All these processes can be optimized and automated within one internal system that is called VRP or Vehicle Routing Problem software that would be developed in accordance with your company’s size, workload or volume, and other requirements.
The route optimization software that can help you solve the VRP
Implementing route optimization software into the company’s logistical processes is the surest, fastest, and most efficient way of solving a vehicle routing problem of any kind that a company might be facing. The good news is that there are many available options to choose from nowadays. But you’ll have to do deep research to find a solution that will meet your specific requirements and best fit your business needs.
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 good idea to acquire/phase in such multifunctional software.
But management systems aimed at solving several logistical challenges also have their downfalls. First of all, building or purchasing a wholesome, 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, baseline functions. If some of them remain unused (which 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 simultaneously cover and satisfy the needs of all businesses. To make the right decision, review the logistical processes of your company, calculate the budget, and consult with a professional business analyst.
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 this case, using some off-the-shelf route optimization systems will help you get a better understanding of your requirements and give you a sense of what feature set you might want to or will want to ultimately 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.
The 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 on creating 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 improve the quality of your 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 the key points here:
- Accuracy. In manual vehicle 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 will end up being much more costly for you overall. Hiring a person that can do such work full-time would result in higher expenses than the 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 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 and efficiency, which typically leads to higher profit margins.
- Enhanced satisfaction. Customers should be at the heart of any business. A vehicle routing optimization solution will allow you to take the quality of your delivery services to the next level and boost customer satisfaction.
Ready-made vehicle routing software
These days, there is quite a wide variety of available ready-made VRP software solutions on the market. All of them offer a similar range of functionality and services that primarily aim to improve your customers’ experience and shipment quality. We would like to discuss some of the most popular and frequently used vehicle routing software that were defined as qualitative by Gartner.
Oracle Transportation Management Cloud
This is one of the most popular ready-made vehicle routing software that provides proper management of any type of deliveries all over the world. Among the key features this cloud-based solution offers that we would like to mention are:
- Order planning and management
- Tracking the order status
- Scheduling and booking shipments
- Invoice of each delivery
- Data analytics
Appian Transportation Modeler
Appian is the provider of safe transportation that aims to provide improved customer experience for the company they deliver from as well as for their services. This solution implies the availability of their carriers and transport like fleets so that means that they not only help to organize and monitor the delivery process but they perform the order shipments on their own. Among the main features that we would like to note are:
- Visualization of customer layout
- Data analytics
- Report about the best area for sales based on analyzed data
Paragon Vehicle Routing & Scheduling Optimiser
Paragon is tasked with optimizing the vehicle scheduling and routing in the way of providing specific delivery route optimization algorithms and shipment planning. We also would like to mark the core function that Paragon offers, and they are the following:
- Reduce time and money spent on planning
- Proper scheduling of the shipments
- Support for trucks and drivers during the delivery.
Custom development and its benefits for your business
Compared to the ready-made solution, the development of your custom vehicle routing solution seems to be quite complicated and long-lasting. However, you may come to understand that your custom software is an investment in your future business development. Once you implement your system, it can always be changed up to your current demands, updated corresponding to the latest tech trends on a software market, easily scaled and expanded by functionality, etc. It means that this software solution fully depends on your decisions and is customized to the company’s requirements.
We`d recommend you to develop and deploy the MVP of your future solution with the required functionality to test it for your company`s workflows, analyze its efficacy, reveal flaws, and finalize the solution that would be appropriate for your business. The MVP cost would amount from $17000 to $27000. The final cost depends primarily on the range of specifications and general scope of work that is known at the end of the development process as there is a high likelihood that project details will be changing during the development life cycle.
We also would like to ensure you that our estimation approach is highly detailed, clear, and easy to understand. We know how to keep the project under your particular budget. Hence, we would like to show our estimation template and how thorough it actually is.
Due to the defined scope, a software project is divided into several large pieces that are called sprints when each sprint is discussed thoroughly, planned, split into tasks that are assigned to particular developers. Talking about this vehicle routing software solution, the development process of MVP can take at least 3 to 4.5 months that also depends on whether the ready-made solution already suits your expectations and acceptance to continue development.
Let us say a few words about the development team this type of software will need.
We also would like to emphasize the importance of the role of the Scrum master as this team member is responsible for managing and tracking every stage of the development process, keep the client informed about the changes in the development life cycle and make sure that all tasks are executed appropriately.
You may ask why we use Scrum methodology as a core. Scrum methodology suits all types of software projects and surpasses other methodologies because with it:
- There is no need to wait until full specifications are ready, development starts right away;
- Faster increments of the product development;
- Possibility to add changes whenever they are required, without additional re-estimation and confirmation;
- Higher maintainability of the code;
- Speed of development can be managed by adding/removing resources upon request;
- Payments are monthly and easy to plan.
Here is the average cost of vehicle routing problem software provided by our team.
Putting it all together
A vehicle routing problem is a common challenge faced by many businesses. Although it can be solved manually, such an approach is far from 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. The ready-made solution can cover your workflows only partially as it does not suit all your company specialties and demands 100%. A custom vehicle routing software is tasked with considering all your demands to boost the productivity of the workflows according to their specifications.
Develop a custom vehicle routing optimization software and you’ll get a reliable, cost-efficient, and fast solution that will lead to higher profits and improved customer satisfaction. GBKSOFT is here to help you define the weak sides of your company and find the right solution to turn them into strengths with the use of custom vehicle routing problem software.