Logistics Optimization

How route optimization technology solves the challenges of last mile delivery

June 11, 2024

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From initial development and testing to manufacturing, there’s a lot that goes into getting a product into a customer’s hand. But despite all the steps that come before it, last mile delivery can often present businesses with the biggest challenges. 

The challenges of last mile delivery

Let’s look at the challenges of last mile delivery using a bottle of soda. 

In this scenario, the soda will start its journey in Location A, a manufacturing facility producing both the bottle and the beverage. Once bottled, the soda might go to an inventory warehouse, which we’ll call Location B. This journey from A to B is the first mile.

From here, the soda will be shipped to a Location C, a number of smaller, local warehouses servicing specific areas. We call the trip from B to C the middle mile.

The last step in the journey is the trip from the warehouse, Location C, to the soda’s final destination, Location D: restaurants, grocery stores, convenience stores, or residences. This last journey from C to D is what we call the last mile.

While the first and middle miles each have their unique quirks, such as coordinating delivery of various supplies for the right day to ensure adequate storage space or that no ingredients are sitting for too long, it’s the last mile from C to D where things can really get complicated. Depending on the size of the business, the soda might leave the manufacturing plant and set off for one or a network of dozens or hundreds of distribution centers across a country, from where each center could be organizing delivery to thousands of different customers a day. 

Here we run into a raft of dilemmas: what’s the best way to group deliveries, plan the order of stops, and determine the routes to take? This is what’s known as the traveling salesperson problem - and it’s a big one. Four stops in a route gives 24 possible unique routes, but get up to 10 stops and this balloons to a whopping 3.6 million routes a driver could take.

For 5 vehicles that have to visit 50 stops, this is now an astounding 10 to the power of 227 - more than the number of stars estimated in the universe. IBM’s SUMMIT supercomputer, the world’s fastest, would take 10 to the power of 203 years to get an exact solution to this problem.

As if that wasn’t difficult enough, we also have to account for other factors off the road, such as delivery time windows, vehicle capacity, driver shift time and breaks, volume, weight, fuel efficiency, and more. 

While paper maps and spreadsheets were once the trusted tools for the industry, the nature of logistics today, with customer expectations higher than ever and margins as tight as they can be, means more sophisticated tools are needed to keep businesses going.

How route optimization software can help 

The last mile problem can be solved with route optimization technology. Integrating with your network’s existing tools, this software is powered by vehicle routing problem, or VRP, algorithms to quickly determine which of those billions or trillions of possible routes is the best one to take, in real time. 

In helping you plan better routes, this technology can bring your business a number of benefits: 

1. Increased productivity of staff and resources 

The most obvious benefit to route optimization software is, of course, the reduction in time your back office spends planning routes - in fact, it can lead to a reduction of up to 80% in time spent on planning. This is time that your office-based team can spend focusing on strategic projects and long-term thinking instead of poring over maps and battling spreadsheets.

Beyond the office, using this software can also boost the productivity of your team on the road, contributing to significant cost reductions by helping you:

  • Bundle orders from different customers into the same route, increasing the number of deliveries per shift
  • Support both pickup and delivery activities by using the volume or weight capacity of a vehicle in real time 
  • Assign the right inventory to depots, dark stores, MFCs, or PUDOs based on flexible constraints such as time or distance
  • Reduce the time a vehicle spends on the road and idling in traffic, improving fuel consumption and vehicle maintenance costs

2. The ability to spot and solve bottlenecks

Even the best laid plans can go awry. In fact, Newell’s theory of constraints posits a system will always encounter a bottleneck that prevents a goal from being achieved. With so many moving pieces, the logistics industry in particular seems to have an endless number of potential bottlenecks, so being able to spot them before they occur, or as soon as possible when they do, is crucial.

By integrating and visualizing data across your network and supply chain, route optimization software can help you spot bottlenecks and solve them quickly, with your teams in offices, warehouses, and on the road given the ability to track and manage processes in real time.

3. Improved customer experience

With the right delivery options - or lack thereof - playing a big part in the modern consumer’s buying decisions, any tool that can help get deliveries to customers quickly, at low cost, and most importantly, on time, is key to improving customer satisfaction.

Route optimization software with real time tracking and communication features can provide better tracking for customers, and reliable expectations on delivery windows, making sure customers aren’t waiting hours for a delayed delivery.

The impact of the software will be easy to measure, through everything from customer satisfaction scores (CSAT) and delivery satisfaction scores (DSAT) to a reduction in late deliveries and customer complaints, and increased delivery time window adherence. 

4. Achieving environmental, social, and governance (ESG) goals

A 2021 report from consulting firm PwC found that 83% of consumers think companies should be actively shaping practices around environmental, social, and governance (ESG) issues, while 86% percent of employees stated that they prefer to support or work for companies that care about the same issues that they do.

Given the obvious impact it has on emissions, the logistics industry understandably has a huge role to play in achieving ESG goals, and route optimization software can help the industry get there.

For example, by helping to plan more efficient routes, which can boost the productivity of each delivery shift and reduce a vehicle’s time idling in traffic, route optimization can help businesses reduce fuel consumption and reduce their Scope 1 emissions. Meanwhile, the ability to simulate scenarios like an investment in an electric vehicle fleet or renewable energy sources for their operations can help businesses plan their transition to net zero. 

By capturing data from across the supply chain, optimization software can also help businesses measure and track their progress on ESG, and provide insights on what more can be done.

5. Long-term strategic planning

While route optimization software is great for the day to day of running a delivery network, it can also help your business with long-term strategic planning. With your data already flowing through, the complex algorithms used to plan routes can also simulate the outcome of hundreds of scenarios, helping you make more informed decisions on future moves.

For example, you can simulate the outcome of scenarios like:

  • New routes and different zoning rules
  • Scaling your fleet
  • The efficiency of a new fleet, including different types of vehicles
  • Measuring routes against different optimizations, such as lowest cost, fastest route, least amount of drivers required, time window constraints, distance traveled, and mixing pick up and drop off
  • Introducing charging infrastructure, new depots, or micro fulfillment centers

How to choose the right route planning and optimization software

Implementing new software can be a big decision for businesses: it can involve input from various stakeholders who will all inevitably have different opinions, getting buy-in, accounting for and cleaning data, integrating systems, and then actually learning how to use it.

So, if you’re going to invest in a new solution, it’s important to do it properly. The first step is to think about your needs and goals for what you want to achieve with the software, so you can then make sure you’re keeping an eye out for the right features. 

Here are our tips on the must-have features to look out for when selecting the right software for you: 

  • Easy setup and integration: You’re in the logistics business, not the software business, so keep an eye out for a software platform with a set up process your business can handle - if you don’t have software developers on hand to help, a complex setup that involves coding won’t do you much good. Adiona offers the choice of an end-to-end platform or connecting via API, catering for both ends of the spectrum.
  • Data capabilities: We may be living in the age of Big Data, but it’s useless unless you’re able to make sense of it. The right platform will be able to not only manage your data through integration with your existing systems, but also augment it with its own sources, giving you a richer data set to work with. 
  • Real-time tracking and communication: Customers expect real-time tracking, and so should you. A few capabilities to look out here include including driver location monitoring and driver communication, estimated arrival times, and customer notifications. A more comprehensive software platform will allow for tracking across your supply chain from end-to-end, giving you visibility that will enable you to spot and solve potential bottlenecks before they happen.
  • Reporting: The only way to improve is to learn from what’s already been done, so any software platform you choose needs to have robust analytics and reporting dashboards. If you’re a data nerd, on the other hand, and love to sort through it yourself, check whether the software allows for easy exporting of data.
  • Simulation and forecasting: The past can tell us a lot about the future, so look for a platform with strong forecasting and simulating abilities. Adiona’s Fleet Simulator, for example, can run hundreds of scenarios with your organization’s real data to help you evaluate purchasing decisions or fleet changes before you roll them out. 

Why choose Adiona? 

You’re on our website learning about last-mile delivery route optimization software, so you had to know the pitch about Adiona was coming!

Adiona is a last-mile delivery route optimization software that can handle even the biggest of enterprise fleets. Our product suite includes:

  1. FlexOps Command: gives you one place to plan, optimize, and simulate your delivery operations by bringing your entire network together, from production to delivery
  2. FlexOps Diagnostics: helps you learn from the past, using machine learning and historical data to map your processes, re-create your delivery operations, and identify opportunities for improvement across costs, routes, delivery capacity, and fleet management
  3. FlexOps Fleet Simulator: uses your real data to run hundreds of scenarios, helping you evaluate potential plans. For example, you can do everything from simulating your expansion into new territories, to identifying low cost and low disruption opportunities to transition into a more sustainable fleet.

We’ve talked a lot about the importance of data, so it’s only right that we provide some now - here are just a few of the great results we’ve achieved for our clients:

Beyond these impressive boosts to our clients’ productivity, we’re also passionate about the impact that route optimization can have on helping the logistics industry achieve its ESG goals, from reducing emissions through more efficient routes, to transitioning a fleet to electric vehicles.

We’re proud to have helped reduce Neverfail’s annual greenhouse gas emissions by 7 million tons, and are excited to continue helping the industry achieve emissions and sustainability goals. 

Read more about our vision here.

How to get started with Adiona 

Sign up for a free 14-day trial of our complete software suite, or contact us with any questions!