What Is Dynamic Route Optimization?

It’s a cliche at this point to say that the last mile of the supply chain is often the most expensive—but it’s true. Studies show that it can account for about 40-50% of total logistics costs, and anecdotally we’re pretty sure that it accounts for more than half the total frustration, lost sleep, and pulled out hair in the supply chain.

A lot of that frustration comes down to route planning. Many businesses that roll out static route plans that form the basis for recurring weekly deliveries are only able to reroute once or twice a year because the process is so involved. This leaves them with limited flexibility, which can create challenges down the road.

With customer expectations skyrocketing, delivery organizations are under more pressure than ever to quickly and effectively respond to customer requests. You need to take control of your routes and optimize them for efficiency—otherwise you simply won’t be able to keep up with increasing order volumes. That’s why purely static routing is increasingly becoming a relic of the past. 

Static vs Dynamic Routing

Generally speaking, route planning falls into two categories: static and dynamic. Static routing is when deliveries are dispatched onto predetermined routes that don’t change from day to day or week to week. These predefined routes are fixed, so they provide predictability at the expense of flexibility. Customers know when you’re going to show up every week, but it can be difficult to maintain efficiency when you try to adjust route plans based on real-time information. 

Even in industries where predictability is paramount, this lack of flexibility can create challenges. Static routes get less efficient as you make adjustments to them, meaning it’s hard to maximize your fleet and vehicle capacity. At the same time, it’s harder to respond in a timely way to customer requests. When you’re trying to meet increasing customer expectations, static route planning often doesn’t cut it.

In contrast, dynamic route optimization in logistics means that routes are created from scratch each day for a given set of orders. You can make adjustments based on your parameters and update existing routes if customer needs change. The main advantage of dynamic route planning and optimization is that it gives you the ability to create the most efficient routes based on the orders you’re actually delivering each day. 

The challenge here is that dynamic routing isn’t a process that can be effectively carried out by hand. That’s why it is essential to implement dynamic routing software in order to keep customers happy and reduce operating costs. The right platform can also adapt and implement changes as your company grows, ensuring scalability and adaptability. 

The Basics of Dynamic Route Planning Software

Dynamic routing systems enable fleet managers to optimize routes and manage operations more effectively and ensure efficient deliveries. Historically, planners might have designed static routes every few months or even every year. Dynamic routing software, by contrast, lets you generate delivery routes based on each day’s unique mix of orders. 

(Hybrid static-dynamic routing—where you dynamically optimize some of your orders around an existing set of fixed orders—can be a help for businesses where maintaining some type of fixed route is part of the business model. In these cases, dynamic route optimization can also help you update your fixed routes more frequently than just a few times a year.)

Dynamic routing systems help to guarantee on-time delivery while improving customer satisfaction. By taking into account different variables—including delivery time windows, driver availability, traffic congestion, weather conditions, load constraints, driver skill, service time, and more—dynamic route planning software develops route sequences for your drivers that maximize the number of stops you can complete each day.

What to Look for in Dynamic Route Optimization

Every delivery business is different, and everyone’s going to approach their last mile logistics process with a different mindset and a different set of existing teams and processes. That means there’s no one-size-fits-all approach to routing. 

At the same time, there are a handful of capabilities that you should look for in your dynamic routing solution pretty much across the board:

• Scalability: You need technology that makes it easy to scale your delivery routes up or down as needed depending on order volumes and other factors—which pretty much means leveraging technology in the cloud rather than on-premise. 
• Speed: This is closely related to the above. You don’t want your solution to slow down to a crawl when you ask it to route multiple stops or work around too many parameters.
• Flexibility: You don’t want to have to completely rework the output of your routing solution every time you run it because it can’t handle all of your parameters. Instead, you need a solution that handles all of your routing use cases—while also giving you the flexibility to make adjustments by hand if needed.
• Cost visibility: To make data-driven decisions about how best to serve your customers, you’ll want to be able to predict delivery costs at the planning stage and see how different route changes impact delivery costs. Your route optimization solution should be able to offer that in real time as you’re making adjustments. 
• Integration: This is a broad category—and with good reason. Your route planning should integrate seamlessly with your route execution. Likewise, it should be integrated with other last mile functions and workflows to ensure efficiency and visibility across roles and processes. Routing is intimately connected with the rest of the last mile logistics process, and your technology needs to reflect that by housing route optimization under the same roof as other functions like delivery visibility and customer experience.
  

Benefits of Dynamic Route Planning

As technology advances, companies can increasingly leverage data collected throughout previous and ongoing deliveries via AI and machine learning. Not only does this make your route planning smarter and faster, and it also increases its predictive powers. 

With the right data and the right technology, you can overcome the inherent complexity of the last mile problem to find routes that work for your drivers, meet your customers’ needs, and ultimately keep costs manageable. Through dynamic route optimization, delivery errors can be reduced, on-road efficiency can be improved, and last mile deliveries can become a key driver of great customer experiences.

Here are a few of the most powerful advantages right dynamic routing software can offer: 

Reduced costs

It’s no secret that finding the shortest path between two points cuts down on fuel consumption and driver hours. But that’s not the only way that dynamic routing can save you money: It can reduce the number of failed deliveries by ensuring on-time performance and accurate ETAs. It can reduce the number of hours routing specialists spend putting the fastest routes together in the first place. And it enables you to choose the most cost-effective ways of serving your customers by looking at holistic cost-to-serve.

Improved customer experience

Pretty much all of the methods of reducing costs that we mentioned above can also be applied—often simultaneously—to improving the delivery experience that you offer your customers. The ability to deliver on time is huge regardless of what industry you’re in—and AI-powered dynamic route optimization with highly accurate ETAs can make that happen consistently. Likewise, when you have the flexibility to adjust your routes quickly and easily, you can respond more quickly to customer requests. This might include last-minute order changes, or simply last-minute orders. When you can route them for the next day or even the same day without breaking a sweat, you can build brand loyalty and ensure happy customers. 

Future proofing

Delivery businesses have to deal with a constantly-changing marketplace, and that can be hard to do when your processes are slow or inflexible. With a SaaS-based dynamic route planner that has the kind of capabilities we’ve been discussing above, you can set yourself to evolve with the marketplace, a changing technology landscape, and changing business needs. You can update your routes as needed, you can ensure that you’re always running the most up-to-date routing software so you can avoid compatibility issues, and you can gain new capabilities over time to stay competitive. 

What Does the Next Generation of Dynamic Routing Look Like?

Most businesses deal with the complexity described above with whatever tools are available to them—and for a long time, there weren’t really any great alternatives to the kinds of legacy systems we’ve mentioned. But there are three trends that have impacted a wide swathe of technologies in recent decades that have helped move the route optimization technology market to where it is now. 

• SaaS platforms: Back in the day, route optimization systems were deployed on-premise, which meant that sophisticated software options were inaccessible to business that couldn’t wield a large IT team with a budget to match. With the introduction of SaaS options, this paradigm totally changed. SaaS platforms enable businesses of all shapes and sizes to focus on their core competencies while leaving things like software updates, security patches, provisioning additional computing power, etc. to software providers. Crucially, SaaS solutions that are architected to scale give users the ability to run routing scenarios in a matter of minutes, which can significantly speed up the routing process. 
• AI: AI is having a big moment right now, but AI and machine learning have actually been having an impact on numerous logistics and fleet management technologies behind the scenes for many years. When it comes to optimizing routes, this means leveraging data from past delivery runs to predict future delivery ETAs. This enables you to plan significantly more accurately, getting more out of your capacity and bridging the gap between planning and execution in the process. 
• Modern UX/UI: It might seem strange to put something that feels as basic as user experience on the same list as AI, but in point of fact modern UX/UI principles have a huge role to play in modern route optimization. Why? Because systems that aren’t designed with users in mind can be difficult to use effectively. When you have to bring in outside specialists—or even when just one person in the company can work your routing software—you’re effectively stuck. 

When you braid these three strands together, you get the next generation of route optimization. Modern dynamic route optimization software has the potential to be fast, flexible, scalable, and easy-to-use. It can enable you to reroute much more frequently and refine your routes much more quickly—just as it can help bridge the gap between planning and execution. 

Route optimization can be challenging for delivery businesses. But dynamic route optimization can make a huge difference in terms of just how challenging it is—with significant knock-on effects across the entire last mile process.