Summary
Delivery Route Optimization applications are evolving in response to the development of e-commerce businesses and last-mile operations. This article helps supply chain leaders evaluate their investment in fleet routing, scheduling, and last-mile delivery optimization.
Delivery Route Optimization (DRO) refers to fleets and transportation management applications that help organizations manage delivery assets and resources. The DRO applications are used to develop delivery route plans that accomplish the delivery tasks at maximum cost-efficiency while also satisfying customer time requirements and driver safety. Many factors such as when and where stops are made, what can be loaded in each vehicle, and which routes drivers can serve make route planning a complex task.
Three trends in the market have been identified during recent years, which have been heightened by the effects of the COVID-19 pandemic. Online shopping was expanding steadily before the pandemic, but the pandemic enormously grew the demand for online shopping across many industries. Meanwhile, the demand for safe delivery also stimulates new ideas and improvements in technological innovation that enables social distance and contactless deliveries. And DRO vendors have been continuously developing DRO capabilities using artificial intelligence (AI) and machine learning (ML).
3 Industry Trends for Delivery Route Optimizaition
1. Home delivery services and last-mile deliveries increased as a result of the COVID19 global pandemic.
Many logistic companies have been forced to take extraordinary measures to handle the increased online shopping as a result of the COVID 19. Walmart the world's largest company by revenue, with US$514.405 billion in 2019, acquired the last-mile delivery platform JoyRun to strengthen its in-house capability to deliver online orders. Other companies such as Target planned to acquire same-day delivery tech from Deliv.
DRO applications were most commonly-used to plan delivery routes from warehouses to the distribution center, and not so much to consumers. The boost of e-commerce businesses led by the global pandemic, especially in the retail and food industry, changed their business models to better serve end consumers. This trend has increased the demand for route optimization specialized in last-mile operation. A recent survey shows that during the COVID-19 pandemic more delivery drivers in the U.S. were performing more local and regional operations than they used to.
The recent investments and acquisitions made by private equity firms or other organizations into last-mile DRO also show the increased importance of the last mile operations. For example, Bringg and Onfleet raised $30 million and $14 million respectively from private equity firms.
Last-mile DRO applications have many similar features to the more traditional DRO applications, however, there are two differences.
- Last-mile DRO solutions provide a better customer experience: they allow for feedback collection from customers to analyze service levels. The accuracy of estimated delivery time, proof of delivery (POD), and all the data received in feedback can generate insights to improve the end-customer experience.
- Enhanced capabilities to handle more complex fleets and routing options: last-mile DRO solutions can deal with different kinds of fleets such as crowd sourced fleets, delivery robots, or drones. They can cover different delivery methods that consider technicians or other services for the preparation of the route
Recommendations
- Evaluate the business strategy and goals to determine the most suitable DRO application, especially based on order and customer volume. Only newer technologies such as Adiona are built for very large scale organizations.
- To understand the different capabilities of different applications, such as routing of first and middle mile vs last mile, thereby choosing the application vendor more wisely.
2. The usage of AI and ML on last-mile DRO applications is increasing due to the increased need for automation and digitization
New technologies, new business models, and most importantly new demand of consumers have had significant impacts on the DRO market. Over the last couple of years, organizations have been working on digitalizing their supply chain and applying advanced technologies to reduce costs and optimize business processes. According to a survey “ the impact of digitalization on the supply chain ”, over 74% of organizations have invested in AI technologies for the supply chain.
AI technology empowers organizations to develop a scalable, automated method to managing data that the traditional optimization algorithms cannot provide. The benefits of AI technology include recognizing missing and error data and automatedly amending those errors.
Increasingly, more DRO vendors use ML and AI to improve the routing capabilities and develop new capabilities to optimize processes and improve data quality. Many vendors indicate that they have already had applications benefiting from ML, while other vendors are considering putting ML on the schedule.
Recommendations
- Thinking about whether ML and Al capabilities from DRO vendors are helpful to your business. Does it improve your digital process operations and customer experience?
- Take a benefit from ML and AI technology in DRO solutions. For example, to improve the vehicle routing with accurate Estimated Time of Arrival through more accurate prediction of traffic and time window at each location based on historic data.
- Evaluate how the DRO solution can continuously evolve to provide the needed capabilities for a fast-changing transportation landscape.
3. Mobile, digital, and customer engagement capabilities in DRO has become key in a post-pandemic world.
DRO technology plays an active role in keeping people safe from contracting or spreading the virus through direct contact with other people. The following capabilities contributed to a safer environment for both drivers and recipients:
- Electronic signature of bill of lading (BOL) and POD documents
- Digital payments
- Geofence-based notifications
- Delivery to a safe location
- COVID-19 insights in en route maps
- Last-mile visibility and branding capabilities
Recommendations
- Keep a safe environment for your fleet and customers by promoting a contactless delivery using geofence, notification, and other DRO capabilities such as remote POD signing or digital payments.
- Leverage DRO solution capabilities to digitize common manual processes such as POD collection and scan.
- Develop customer feedback capturing capabilities to have a deeper engagement with the end customers. Analyze the collected data to improve your routing model and decide when to switch from cost optimization to service optimization.
