Route Optimization Software—A Spurt in Logistics Industry

23 Jan, 2023 | Articles

The use of algorithms to determine the shortest possible path for one or more destinations while lowering total expenses and achieving higher desirable performance is known as route optimization. The transportation and logistics sector's technology is expanding, and many software businesses have begun to embrace these advanced technologies to optimize routes with minimal delivery time and excellent fuel economy. 

The use of technology such as artificial intelligence and machine learning in conjunction with cloud data is altering the game of route planning. For example, "Smart Monkey," a Spanish firm, is aiming to make the logistics sector smarter and has improved its operations by 30%, resulting in reduced time, gas, and operational hazards.

In 2020, the global route optimization software market was worth USD 3,729 million. It is expected to reach USD 12,416 million by 2030, at a CAGR of 11.56 %. The market is divided into sections based on enterprise, deployment, vertical, and regional overview. 

Booming Market of Route Optimization Software 

According to Sustainable America research, the typical American motorist spends more than 16 minutes per day idling their car, which consumes up to 3.8 million gallons of petrol and accounts for over USD 7,980,000 in waste. According to the Mobility Lab, the United States is the world's most congested country, with American drivers spending nearly 41 hours a year battling traffic during peak travel periods.

In the United States, traffic congestion costs almost USD 305 billion in 2017, averaging USD 1,445 per motorist. The region's considerable traffic has a detrimental impact on the logistics business. It raises operating costs, slows product delivery, reduces customer satisfaction, and impacts just-in-time business models. As a result, logistics businesses in the region are increasingly relying on route optimization software to address traffic-related challenges. The route optimization program generates precise and acceptable routes by considering the most current traffic conditions and various other elements. This program is updated regularly with new and past traffic data.

As a result, real-time traffic data reduces logistic expenses while simultaneously ensuring on-time delivery of goods. Furthermore, route optimization software gives real-time information on the vehicle's location, allowing company managers to verify that drivers are not taking needless breaks along the way. As a result, organizations in the area are progressively implementing route optimization software to avoid such difficulties, driving market expansion in North America.

For the previous decade, the European organic market has expanded rapidly. By the end of 2017, 14.6 million hectares of land in Europe were farmed organically. In Europe, there are over 5300 importers, and the region's importers have experienced rapid expansion. As of 2017, Europe accounted for 60% of all food waste, with spoiling accounting for about 21% of waste. As a result, corporations are increasingly using route optimization software to deliver these perishable items. As the delivery time for these items grows, the quality of goods decreases, hurting client loyalty. As a result, corporations use route optimization software to cut transit time and expenses.

Route optimization software uses AI and machine learning to reduce logistics costs while simultaneously reducing trip time. Furthermore, route optimization software can accommodate a variety of limitations such as time limits, traffic circumstances, and weather concerns. As a result, enterprises are enthusiastically applying route optimization software to transport organic meals on schedule, further boosting market growth across European countries.

According to a research study conducted by the United States Conference on Trade and Growth (UNCTAD), African nations must support industrial development to increase economic progress and alleviate poverty. Furthermore, African nations' IT infrastructure is poor, and digitization is low. As a result, the region's adoption of route optimization software is very low, severely impacting the market growth. However, government initiatives and smartphone adoption in the area are expected to contribute to market growth in the near future.

In the software as a service model, the software is licensed on a subscription basis and is centrally hosted. In contrast to traditional or planned route planning, software as a service routing software is based on a pay-per-use approach. This strategy does not need infrastructure investment, hefty setup fees, or dedicated resource costs. As software as a service is scalable, it is expected that numerous firms will implement the program. Furthermore, with the SaaS routing software, several devices are not required in each car for GPS tracking, GPS navigation, and other services. As a result, the advent of SaaS model route optimization is expected to gain pace over the projection period.

The SMEs in the route optimization software market accounted for USD 1,172 million in 2019 and are predicted to grow at a CAGR of 12.21% by 2030. SMEs are projected to boost market expansion in emerging nations like Peru, Colombia, Chile, Argentina, and Nigeria. Furthermore, repeated ups and downs are unavoidable for small businesses over the forecast period, necessitating a focus on staff and asset management to fulfill customer expectations. As a result, implementing technology such as route optimization software can provide scalability to deal with market fluctuations.

The big enterprise category was worth USD 2,558 million in 2019 and is predicted to expand at a CAGR of 11.32 % by 2030. This is due to the presence of huge corporations in developed regions such as North America, Europe, and Asia-Pacific. In big businesses, route optimization software combined with route planning and fleet management necessitates the administration of dispatch and services hampered by constraints such as time and location. Traditional management techniques are time-consuming and inefficient, broadening the scope and providing vast chances for the route optimization software market in such firms.

The route optimization software is implemented and operated through the computer infrastructure and in-house servers of businesses. To execute, this program requires a bought copy or license. Furthermore, on-premise software is frequently paid as a one-time licensing cost based on the number of users and the size of the business. However, it is a capital-intensive procedure requiring the purchase of gear and upfront license payments for software maintenance, training, and upgrades. Furthermore, on-premise route optimization software allows greater flexibility and better control over data and security.

On-premise route optimization software contributes to higher client retention and profit margins. Furthermore, it aids in acquiring more consumers, improves communication between businesses and customers, assures consumer pleasure, and gives ample potential for future expansion.

Cloud-based route optimization software provides a network-based solution that is accessible from any location with an active internet connection. Third-party solutions are typically easier to integrate with. It eliminates the need for capital expenditures for all computer infrastructure, such as hardware and data servers. Cloud-based feedback provides real-time assessments of all operational actions from company and customer perspectives. However, the data is kept on a distant server, which raises the prospect of data leakage.

The current competitive climate in all economic sectors needs maximal profit for any firm to thrive. Logistics expenses account for the lion's share of overall firm spending in the transportation industry. These expenses are heavily impacted by the supply chain's fixed and variable costs; hence, supply chain optimization can assist lower the costs related. Customers, on the other hand, expect rapid and efficient delivery in the booming e-commerce sector. As a result, meeting these expectations and gaining client satisfaction is critical for service providers. According to the United Nations Conference on Trade and Development (UNCTAD), e-Commerce sales climbed by 13% in 2017. In such a case, using route optimization software provides various benefits to the organization, including meeting customer expectations and lowering incidental expenses.

Route optimization software can help with automated route planning, live vehicle tracking, fuel reduction improvement strategies, and accurate product data to maximize truck efficiency and time-heavy deliveries. It can also aid in benchmarking and reviewing progress and modeling the consequences of changing vehicle size, delivery locations, delivery frequencies, and drive hours to make better decisions without investing extra time and money. As a result, various transportation and logistics organizations have implemented route optimization software in their operating activities.

Transportation activities in Latin America are not lucrative for firms since vehicles take days to reach their destination due to various problems such as traffic, bad infrastructure, and others. Brazil sells meat and soybeans to China, but the process is slowed by transportation. China and Japan have expressed an interest in Latin American exports and have offered funding to upgrade the region's infrastructure. Latin America is mostly a medium-income region with a rapidly increasing middle class looking to increase buying power. As a result, demand for private light-duty cars is increasing. As the market in the region is growing, so is the demand for heavy-duty trucks used to transport commercial items. However, Latin America has extremely low fuel efficiency and is working to increase both fuel economy and gasoline quality.

Latin America also has a significant urban population, with cities housing 80 % of the overall population. The urban populace has a strong preference for cutting-edge technology and is progressively embracing technologically advanced items and software. Furthermore, Latin America is investing heavily in technology to improve real-time location tracking and traceability across the logistics chain, which is critical to assuring transportation competitiveness and sustainability. As a result, the region is keen to use route optimization software to avoid transportation complications.

Significant Developments in Global Route Optimization Software Market

The route optimization software is not only advantageous to the service business, but it also has significant benefits for public safety and government. The major service areas are waste management and recycling, street maintenance and public works, and traffic and accident control. The escalating number of fatalities and injuries caused by careless driving needs a tangible remedy. Some recent advances in the route optimization software sector are listed below.

  • Market leaders are introducing new route features in Google Maps. Google Maps will collaborate with route optimization technologies to provide users with timely updates.
  • Google Maps' name is being updated on the Google Apps platform. It is a significant move that will place a greater emphasis on route optimization.
  • The primary players in paragon software are improving the software routing and scheduling functions. More than 40 trucks were used to launch and test the routing system. The market will benefit from the combination of technology and telematics. These characteristics make it simple for car users to obtain information in real-time.

Soaring Applications of Route Optimization Software in Various Industries 

The construction business is typically thought of as one with customer-driven projects, huge investments, and relatively unpredictable planning conditions, making supply chains more difficult to manage when compared to other industries. In the sector's supply chain, project planning methods such as Critical Path Method (CPM), Metra Potential Method (MPM), Program Evaluation and Review Technique (PERT), and Gantt charts are used. 

However, project features such as using the same resource pool for many projects, waste accumulation and disposal, fulfilling the interests of various stakeholders, and environmental issues must be addressed since these are crucial for the sector's operations. As a result, the sector requires effective planning and management to mitigate the effects of the variables mentioned above. The incorporation of route optimization software will provide synchronization to operations by assisting in the following areas, which are briefly stated below:

Construction Materials Supply Chain Planning: This includes assistance with bulk cement and aggregate delivery scheduling, production planning for brick manufacturing and concrete products, logistics planning for building materials distribution, and strategic optimization of construction logistics and workforces.

Addressing Environmental Concerns: Due to increased pollution generated by expanding building operations, the construction sector is seeing a surge in the predominance of low emission zones. Route optimization software can assist the segment in operating in low-emission zones, optimizing consolidation techniques, and planning vehicle types based on end purpose. It also guarantees that activity is re-optimized in response to delays, urgent requests, and traffic issues.

Due to the growing number of older adults and related chronic conditions, optimization for healthcare services has gained traction over the years. By guiding the safest and shortest path feasible, route optimization can assist in assigning the optimum resource for nursing and managing frequent and emergency trips to hospitals. According to the National Institutes of Health, the aging population is expected to rise exponentially from 126.5 million in 2015 to 446.6 million in 2050. Asia, South America, and Africa have a significant elderly population and face a high burden of communicable and non-communicable illnesses. As a result, these areas are expected to become potential market spaces for route optimization software in the healthcare industry.

With the introduction of e-commerce in the healthcare industry, the scope of implementation for route optimization software has expanded. Netmeds, PharmEasy, Practo, mCHEMIST, Care on Go, Click on Care, and are among the healthcare-related e-commerce companies expected to deliver medications on time by utilizing route optimization software. The use of route optimization software will assist these businesses in planning the quickest and safest route feasible, managing patient data, and tracking the delivery vehicle.

The telecom industry is likewise heavily focused on lowering operational expenses. As a result, numerous telecom providers have begun to integrate route-optimization software to improve administration and reduce costs. Vodafone Ziggo, a Dutch-based operator, which provides fixed, mobile, and integrated communication and entertainment services to consumers and companies, incorporated this software in 2019 to lower operating expenses. It was successfully installed on a SaaS-based basis for the company's new interconnect billing platform, replacing three different current legacy billing systems with a single-stop solution to decrease complexity and optimize costs.

Competitive Landscape

Some of the major players in the global route optimization software market are:

  • Bringg 
  • Caliper Corporation 
  • FarEye 
  • AMCS Group 
  • Jungleworks 
  • LogiNext Mile 
  • Mara Labs, Inc (Locus) 
  • Maxoptra - Magenta 
  • Omnitracs 
  • Ortec 
  • Paragon Software Systems 
  • PTV Group 
  • Route4Me, Inc. 
  • Routific 
  • The Descartes Systems Group Inc. 
  • Trimble Inc. 
  • Verizon Connect 
  • Workwave 

Recent Developments by Key Players:

  • December 2018 – Loginext Solutions partnered with SingPost to strengthen the client base and solidify the company's presence in South-East Asia. 
  • January 2018 – Loginext Solutions launched a voice-controlled automation feature to enhance the features of the company's products and thereby achieve technological leadership. 
  • November 2017 – Loginext Solutions partnered with IBM to streamline the e-commerce supply chain and attract customers from the FMCG, e-commerce, retail, and transportation sectors. 
  • December 2017– Caliper Corporation announced it became a member organization of the U.S. Geological Survey (USGS) Coalition. 
  • February 2018 – FarEye raised Rs 61.53 crore (USD 9.56 million) in a fresh round of funding from Deutsche Post DHL Group. 
  • November 2018 –FarEye announced the acquisition of Dipper Technologies, a freight logistics marketplace, to strengthen the company's position as a leader in last-mile delivery and provide enhanced clarity for delivery accuracy with Dipper's analytics. 
  • June 2019 – FarEye launched an AI-based real-time dynamic routing feature to empower on-time and cost-effective deliveries. 
  • August 2019 –Zomato partnered with FarEye to help restaurants stay compliant with the Food Safety and Standards Authority of India's (FSSAI) guidelines. 

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