The Ultimate Guide to Route Optimization in 2020

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When your drivers have hundreds, if not thousands, of destinations or clients to visit, planning routes manually is a time-intensive and inefficient solution.

In many industries, driver wages and fuel costs alone make up 59.8% of the total operational cost per mile.

So even small improvements to your driver’s routes can not only help you deliver packages or serve your clients faster but can have a significant impact on your bottom line.

With proper route optimization tools, your business could save up to 20% in mileage and improve your order capacity by as much as 100% without increasing your fleet.

In this guide, we’ll give you a complete breakdown of what route optimization is and how it can benefit your business. We’ll examine real-world examples and provide use-cases for your industry.

We have a lot to cover, so let’s get started.

To skip to the information you’re interested in most, click the links below:

What is route optimization?
Can’t I optimize and plan my routes manually?
Real-world examples of route optimization
How can route optimization benefit your business?
Route optimization use-cases for your industry
Route optimization FAQ

What Is Route Optimization?

Route optimization is the process of improving routes and schedules for any type of delivery or service call. Effective route optimization helps businesses maximize completed orders while incorporating many criteria including driver schedules and available hours, total stops, fulfillment estimates, and legal requirements.

Route optimization is relevant to your company, whether you offer direct-to-consumer deliveries or are in a service industry where your technicians visit client homes or businesses.

Routing your drivers and technicians can be a costly and frustrating process, but with the right tool it can be automated — saving you time, money, and improving customer satisfaction.

Let’s get into it!

Can’t I optimize and plan my routes manually?

As your team, orders, and business grow, manual route optimization quickly becomes impossible.

There are multiple areas that get impacted when you do things by hand:

Efficiency: Are your drivers using the best possible scheduling and routing? Are you using too many vehicles/drivers to meet demand? Beyond a few drivers, manually solving these problems is almost impossible.

Scalability: It takes lots of hours and intimate knowledge of your business to manually plan routes based on requirements such as area, availability, certifications, and more. As a result, you need a large amount of dispatching and operational staff to manage even small fleets.

Accuracy: Are all the time windows, capacities, qualifications, and skill discrepancies considered? The more complex the schedule, the higher the chance for human error — even the best operational staff will make mistakes.

Flexibility: If a driver calls in sick, or you get last-minute orders, what do you do? At scale, a planning team needs hours to adjust — this can cause delays, failed deliveries, and unhappy customers.

Robustness: If your route planners, dispatch staff, or operational assistants quit, how easy is it to replace them? When relying on spreadsheets and simple tools, they need a lot of local and institutional knowledge to complete the job.

I run a small business. Is route optimization only for big companies?

Absolutely not.

Route optimization isn’t just a concept reserved for enterprises and shipping empires. A modern route optimization is an excellent tool for small businesses as well.

By managing your fleet of drivers more effectively, you can lower your operational, fuel, and driver payroll costs significantly — and that’s something that SMBs and enterprises can both appreciate.

With modern route optimization software, your dispatchers or managers can also save hours of planning every day and focus on building their business/improving their customer experience.

For instance, local pool spa installation and maintenance company, Gallagher Pools and Spas, was able to plan their routes 100% faster witha route optimization tool. And the owner-operator didn’t have to spend all his time routing and planning his technicians. He was able to outsource those tasks to less-knowledgeable assistants and take some much-needed time off.

Real-World Examples of Route Optimization in Action

But enough talk about theory. The easiest way to understand what difference efficient routing and planning can make for your company is to look at real-world examples of route optimization in action.

In this section, we’ll cover how two companies (one field-service business and one food delivery company), used a route optimization software to reduce planning time and mileage, improve their drivers’ capacity, uphold scheduled delivery and service times, and improve customer satisfaction.

Field service route optimization example: Telgian

Routing isn’t just important for delivery businesses, it’s essential in the field-service industry as well.

Telgian is a worldwide provider of fire protection, safety, and security services. Their inspection division includes seventy field inspectors based in thirty-five states.

Because the company covers such a wide geographic area, its inspectors are often on the road for a full week at a time.

Planning routes and schedules used to be a manual process because of complex order constraints — things like unique state regulations and licensing requirements. On average, to plan a month of inspections took 3 people 13 days.

Sound familiar?

Telgian needed a routing solution. To further scale their business, they had to make their route planning a more efficient process.

They transformed their planning process with a route optimization software:

Planners can now easily import large volumes of orders (3000+ per month) using a CSV file.
Much easier to set week-long plans including overnight routes (technicians cover large areas) with a different starting/end location every day.
The route optimization software they use automatically assigns orders to drivers based on territory, capacity, state regulations & licensing, and skill requirements for each order.
The route optimization software plans the optimal route and schedule for each technician to service their clients, considering customer-specific service windows, lunch breaks, traffic issues, and more.
The route optimization software mobile app helps keep drivers en route and on schedule.

Telgian saw a number of benefits, including:

Improved scalability — with automated planning, they can accommodate more business with less staff for both planning and actual inspections — achieved 19% YoY growth.
A 256-hour reduction in monthly planning time, enabling them to reduce dispatch staff while increasing capacity by 70%.
Telgian staff can now plan multi-day routes with different starting locations each day — a feature unique to OptimoRoute.

The results:

“It used to take three people more than two weeks to plan routes for the whole country. Now, we have 70% more orders per month, and just one person does all of our planning in about one week. We’ve gone from 312 man-hours of planning to 56 man-hours. It’s translated to annual savings of hundreds of thousands of dollars in salaries.” – Jeff Schaid, Telgian Support Services Manager

By implementing route optimization, Telgian’s planning is now 82% more efficient and takes a single person only 8 days, instead of 13 days for a 3-man team.

This translates to a 66% reduction in operational staff, saving the company hundreds of thousands of dollars in salaries and benefits.

They’ve been able to take on 70% more orders with the same team, and increase revenue 19% YoY for three years running.

Food delivery route optimization example: Hardie’s Fresh Foods

Hardie’s Fresh Foods is a major food distributor in Texas with a fleet of 160 refrigerated trucks.

With low margins and heavy competition, they needed to improve operational efficiency to maintain a healthy profit margin and happy customers.

Route optimization helped transform Hardie’s planning process:

The software they use, OptimoRoute, uses historical data to calculate order durations and automatically plans accurate schedules and routes.
Their software feature ensures strict time windows that factor in the time needed to unload the truck. (If the delivery is scheduled between 10 and 12, but it takes 20mins to unload, 11.40 is the latest possible time).
It was easy to integrate their software with the ERP (Produce Pro) via our robust API.

Hardie’s saw big benefits from the switch:

Increased revenue and profit per driver/vehicle with a delivery capacity increase of 14% and driver cost reduction of 12%.
Better scalability with 8x faster planning, and over 60% fewer working hours from dispatch staff.
Significant increase in rate of on-time deliveries from 89% to 94% with 1.5% MoM improvement.

The results:

“[Route optimization resulted in] approximately two additional jobs per driver per day, or more than 330 extra deliveries per day. It’s exceptional.” – Arley Garner, Hardie’s Logistics Manager

Hardie’s was able to reduce the total mileage of its delivery fleet while also cutting driver costs. The increase in efficiency allowed the company to serve 14% more orders, or 330 extra deliveries per day, with their existing fleet and workforce.

How Can Route Optimization Benefit Your Business?

No matter if you’re scheduling and routing for a mom-and-pop florist or a logistics company operating nationwide, the challenges you face are universal:

Maximizing the orders and revenue from your existing fleet and workforce is hard.
Manual scheduling and planning can take forever and is not scalable.
Fuel and driver wages are a significant expense for your business.
Adjusting to cancellations and sick employees on the fly is complicated.
Delayed and missed deliveries lead to unhappy customers.

Route optimization can help. Here’s how:

#1. Increase revenue per driver and reduce costs

What business isn’t interested in reducing their operating costs and improving revenues per driver? For any business that does delivery or on-site service, low margins are a constant challenge.

When it comes to routing and scheduling, you have to answer a number of challenging questions to optimize your efficiency:

What route will result in the optimal use of your drivers and reduce overhead?
Should you pay for overtime or bring in outsourced contractors?

By factoring in all costs, from hourly wages to mileage (and everything in between), route optimization can help you save without sacrificing the quality of service, or breaking regulations. It also helps you maximize your fleet, enabling each driver to complete more orders or service calls, increasing your revenue and profits.

For instance, when gas pipeline maintenance company Southern Star implemented route optimization, they doubled their productivity while simultaneously decreasing planning and dispatch efforts.

They’re now able to plan the work and travel for more than 250 technicians covering 5,800 miles of pipeline — with only eight people:

“We never purchased [OptimoRoute] to cut headcount. We just want to see if there’s a way for people to be able to fit in more work. There’s tons of work to be done and we have a better insight into how much time it’s taking them to complete so that we can get other tasks done – the ones that have been on the books, but we just didn’t get around to.” – Brad Carter, Planning and Scheduling Leader at Southern Star

#2. Scale your delivery team without extra dispatch/planning resources

Your team spends hours organizing and reorganizing people, schedules, shifts, deliveries, appointments on a daily basis.

With route optimization tools, you can cut down the planning phase from hours to minutes. You can directly import order lists in CSV or excel formats into your route optimization software and automatically assign them to drivers based on availability and requirements.

Your business can create schedules up to 5 weeks in advance, resulting in better long-term planning. Sophisticated route planning software allows you to plan months in advance.

Not only that, but it also factors in employee availability (holidays, PTO), lunch breaks, regulated driver breaks, customer availability (for example, only Tuesdays and Thursdays), deadlines, and more.

This might sound like a risk, as many things can change before the delivery or service date rolls by, but it’s not. With next-generation route optimization solutions also let you to instantly react to unexpected events like customer cancellations, vehicles down and immediately replan the whole schedule.

By planning for the long term, your business can see where you have room to grow and scale your operations, resulting in lower turnover and higher profit margins.

#3. Improves customer satisfaction

Your modern business is at risk: customer reviews affect your success or failure more than ever before.

90% of consumers used the internet to find a local business in 2019, and 82% read customer reviews before making a decision.

It’s not just e-commerce giants like Amazon that should care about reviews. They impact all kinds of consumer-facing businesses. If you want your potential customers to trust you with their money, you need to have a realistic and positive reputation online.

Real-time ETAs, tracking, and SMS messages and emails sent ahead of deliveries or service calls help you avoid delays, failed deliveries or rescheduled appointments.

And that improves customer satisfaction and brand loyalty.

You can ensure your drivers arrive on-time more often and avoid failed deliveries. Keep your customers happy, and also cut down on unnecessary support contacts like the “are you guys here yet?” phone calls most service businesses get every day.

How are you currently distributing deliveries and service calls between your drivers? If you’re like most businesses, you set it up geographically, with each driver having their own delivery or service territory.

It’s a quick method, and it’s easy for even an inexperienced route manager or planner to do manually. After all, you’re just dividing up the workloads based on lines on a map.

But it’s not a perfect solution…

Can you distribute work fairly without racking up extra cost in mileage and hours?
What if different areas of the city or state have different amounts of scheduled deliveries or service calls?
What if the drivers covering different areas have different vehicle capabilities, like refrigeration or storage size?

It’s easy to create imbalanced workloads where specific drivers handle a lot more deliveries than others and have to work overtime consistently. Or where your most expensive driver is paid to sit in their truck waiting around.

Optimized routing addresses all these questions by factoring them into the initial planning process. You can evenly spread orders across your entire fleet and ensure a good work-life balance for all your drivers.

That can make all the difference in employee retention, which is a challenge in many relevant industries. Only 64.9% of commercial drivers stayed on the job for their first 90 days in 2019.

And, with the current shortage of commercial drivers, you want to keep your good ones employed for as long as possible.

#5. Enables you to replan quickly

Last-minute changes to routes are inevitable, and it’s a momentous task to try to make edits across multiple driver schedules on-the-fly manually.

That is why dynamic planning — instant and automatic recalculation of routes to reflect real-world changes — is a necessity in 2020.

Late orders, cancellations, drivers calling in sick, or customers requesting alternative delivery addresses) are just a few factors that can ruin a well-planned schedule in a heartbeat.

When you do routing ahead of time, you must have the ability to replan and manage your fleet of drivers remotely on the fly.

When a driver calls in sick, or last-minute orders come in, your software will calculate availability and assign the new jobs evenly across your fleet depending on their current location, capacity, and route, instead of overloading a few drivers.

Route Optimization Use-Cases for Your Industry

Let’s focus on the game-changing role that route optimization can play for your kind of business in particular.

Here are the seven leading industries which can be helped by route optimization and planning software.

#1. Food delivery

For a food distribution or food delivery company, optimal routing is essential. It can help you cut operational costs and create a happier, more loyal customer base.