What Does the Next Generation of Route Optimization Look Like?

Search for “route optimization” on Google, and you’re likely to see a lot of similar definitions of the term. If you keep scrolling, you’ll mostly see variations on the theme that route optimization is the process of finding the shortest or most cost-effective routes between different points.

We’re not saying that these definitions are wrong. On the contrary, finding a cost-effective way to sequence deliveries along a particular route is of paramount importance for delivery businesses. But these definitions also don’t tell the whole story. 

Sure, with previous generations of route optimization technology and with many legacy solutions, shorter routes are pretty much the end of the conversation. But with the larger evolution in delivery expectations and technology that’s happened in the past few years, it’s time to think bigger. Route optimization can be a strategic tool for boosting customer satisfaction and getting smarter about your entire transportation network. It can help delivery businesses of all shapes and sizes to power a holistic approach to delivery management that’s more agile, connected, and intelligent than in years past.

Going forward into the next generation of routing technology, ensuring that routes are cost-effective will still be a huge part of route optimization’s strategic function. But that won’t be the end-all be-all of routing.

So what, exactly, does the next generation of route optimization look like?

How AI and Machine Learning Are Changing Route Optimization

AI and machine learning have been making headlines a lot over the past year. The introduction of technologies like ChatGPT and Dall-E have made a big splash, even beyond the world of technology, and they’ve changed the way that most people think about AI. 

Compared to these “general” AI applications, the comparatively “narrow” AI that goes into logistics technology isn’t as likely to garner headlines. But it does have the power to be transformative. 

Logistics processes—especially delivery route optimization—can produce huge amounts of data over time. By taking that data and analyzing it, AI can offer predictive capabilities for route planning that would have been unheard of a decade ago. Things like traffic, weather, differences in driver skill and speed, and differences in service time are hard to account for by hand. Even most software solutions have difficulty accounting for how these factors impact routes. But AI and machine learning can leverage them into faster, smarter routing. 

The biggest practical upshot here comes in the form of more accurate ETAs. AI enables delivery businesses to pinpoint exactly when a given truck will arrive at a given stop on a route—all based on the factors we discussed above. In this way, the overall precision and accuracy of the entire routing exercise increases significantly. The result? Customers get their orders on time and businesses are able to use their delivery capacity more effectively. 

What Do Evolving Technologies Mean for Delivery Businesses?

These aren’t the only technologies that are bringing about the next generation of routing. Cloud computing—though obviously not a new technology—will soon be a foregone conclusion when it comes to new routing software. Not all cloud architectures are created equal, but the right multi-tenant SaaS solution has the power to speed up routing significantly. Rather than running your software overnight to generate routes, you can optimize routes in a few seconds and then make adjustments as needed. 

This, combined with AI, has the power to offer transformative benefits for delivery businesses. When you’re able to create accurate, efficient routes quickly, you can do more than just find the shortest routes between stops. 

For instance, you can run what-if routing scenarios to see if you’d be better off routing a particular set of orders from a different distribution center. Or, you could see if it makes more sense to position your distribution centers completely differently. The speed and accuracy inherent in the technology make it possible to run scenarios quickly enough that it’s actually feasible to test out new ideas on the fly. 

For B2B businesses that make recurring stops on a weekly basis, this has the potential to be even more impactful. Many businesses in this area (e.g. food and beverage distributors) run static routes that change very little from week to week. Unfortunately, this often means that the routes aren’t adaptable to changing conditions. If a customer’s ordering habits change, changes to the relevant route often lag behind, resulting in inefficiencies that can cost your business money. 

When your route optimization technology is built to create accurate and cost-efficient routes quickly—and when it’s built to give you the ability to configure routes to your needs—all of a sudden you can quickly make adjustments to otherwise static routes. 

Obviously, in situations like this you want to minimize disruptions along your routes. But the right software will give you the ability to keep your most important stops in exactly the position they’re in—all while updating sequences around those stops to account for day-to-day and week-to-week changes. 

Here too you can run what-if scenarios to test out different strategic initiatives. In this way, route optimization becomes much more of a strategic function—something that’s fully integrated into your larger delivery planning and execution processes. 

How Will Customers Benefit? 

The next generation of route optimization will be more integrated with larger logistics processes. It will be more closely connected with functions like sales and merchandisers. And it will be more intelligent, helping to make smarter and more efficient routes the default. This will help put delivery businesses in a position to do more than just decrease fuel consumption and cut delivery costs—it will help them reenvision the last mile. 

But what impact will it have on customers?

Simply put, smarter route optimization—and smarter last mile delivery optimization in general—needs to be deployed with a customer-first mindset. As technological advances make it easier to stay agile and adaptable in your delivery management, it’s important to make sure you’re prioritizing all the ways that increased agility and smarter processes can lead to happier customers. 

For starters, the ability to predict ETAs with a high degree of accuracy will help ensure that your drivers arrive on time, every time. This goes a long way in both B2B and B2C deliveries towards ensuring happy customers. 

At the same time, the ability to adjust routes quickly without losing out on efficiency means that you can respond more easily to changing customer requests. When customers know that you’ll be able to work with them as their needs change, they’re more likely to be loyal to your business in the long run. 

Taking a step back, the ability to optimize your transportation strategies more broadly also puts you in a position to take a holistic look at the way you’re serving your customers. Would you be able to deliver to a particular account more consistently (and cost-effectively) if you switched it to a different route, or fulfilled their orders from a different distribution center? 

When you can answer those kinds of questions quickly, easily, and accurately, you can truly build a customer-centric last mile. You can boost efficiency across your entire operation and ensure that you’re building lasting relationships with the people you do business with. And it all starts with next generation route optimization.