We live in the age of instant gratification. Today it is possible to buy something on an ecommerce site in the morning and receive it by the evening. The phenomenon of same-day delivery along with drone delivery are taking the customer experience to the next level. However, this wasn’t possible a few decades ago.

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A major contributor to this massive change is the technology that has continuously evolved in the logistics and transportation sphere. And one name that comes to the top of my mind is route optimization software.

The popularity of the route optimization software has skyrocketed in the recent past and it is expected to increase further even in the future.

In this article, we will see the market scenario and growth of route optimization software for the next five year.

But before that let’s understand what route optimization actually is.

What is Route Optimization?

Route optimization process helps to discover the best route out of the available ones when there are multiple stoppages. The parameters to find the best routes may vary; for some, it is about ducking the traffic and rush hours; for others, it would be the cost-effectiveness and convenience (e.g., toll booths, etc.). Therefore, route optimization is more than merely finding out the fastest and the shortest distance between point X and Y.

Businesses use route optimization software to cut down the drive time when there are multiple stops and also considers dynamic complexities like the capacity of a vehicle, time window to perform end-user delivery, driver schedules, and other such things.

The Origin and Growth of Route Optimization

The story of route optimization is around 200 years old, involving a European salesman looking to pitch his product to every surrounding city. It required him to cut down the travel time and use it as a leverage to widen his sales time. And this is when he asked his mathematician friend to find out the shortest possible path between 2000 cities.

His friend was quick to discover that following the possible itinerary would be challenging, such that even a computer’s calculator would fail to do the math of options.

Such a situation provoked the mathematician to reach out to his fellow friends with smart minds, but even they concluded finding the solution to be an impossible one. The mathematical workaround on this problem showcased that to optimize around 45 routes; the total permutations may even exceed the number of atoms existing on this planet. The results to find an optimized route with 45 stops means 1.19 x 10^56 permutations vs. 1.33 x 10^50 atoms in the planet).

the origin and growth of route optimization

Such a problem is called the traveling salesman problem, which is quite a famous one in computer science and remains unsolved to date.

Businesses dealing with the problem of route optimization have come a long way with research and solutions to cater to the traveling salesman problem. Even today, after spending a couple of decades on route optimization, there is no concrete solution except the prediction with an accuracy of 2-5%. Though these are steeper numbers, it can trim up to 40% of the drive time and make the last mile delivery a cost-efficient one.

The route optimization technology is continuously evolving and so is its demand. Let’s have a closer look at it.

The upward trend of route optimization software

For the forecast period of 2018 – 2025, the market of global route optimization software and solutions market is expected to grow at a CAGR 15% approximately.

The operational competency is the need in today’s time. And the only way to address this growth-based business requirement is with route optimization solutions. Even the supply chain has evolved in the last decade with end-customers demanding dynamic and personalized delivery experience. They now expect multiple delivery options, different pickup points, and drop off locations.

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All these while anticipating faster delivery. Here is where the third-party manufacturers and shipping companies come to the picture. They adopt digital route optimization methods with right route optimization apps and systems in place to stay highly competitive in this ever-changing market.

The route optimization trends suggest that by the end of the year 2024, the global route optimization market is expected to touch around USD 5.32 billion at the CAGR of about 24.7%. The significant contributors to the route optimization industries are the growth of IoT devices and Artificial Intelligence.

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North America holds the largest share across the globe when it comes to route optimization software industry in the year 2018 with an expected CAGR of 16.67% in the forecast years till 2025. It is because the US also hosts plenty of tech innovators and players who can disrupt the route optimization market. Therefore, there are more companies adopting the route optimization software in the US.

The use of intelligent logistics is also high over there when compared to rest of the countries which contributes significantly to drive route optimization software industry. In coming times, the Asia Pacific region will witness a rapid growth in the use of route optimization software as there are lot of investments being made on the route planning businesses.

Future Benefits of Route Optimization

There are a plethora of technological advancements witnessed in the route optimization software market. Such developments include Geoconcept that offers an in-hand optimization solution along with the dedicated tour maps for optimization.

It enables delivery professionals to get access to the Geoconcept environment embedded in delivery tracking software aimed at solving customers’ work sync issues and other such restraints.

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Key Target Audience for Route Optimization Software Market

The route optimization software is up for the grabs for any business looking to transform itself and drive growth while being cost-effective. Most of the small and medium businesses can leverage innovations in the route optimization software market. The target industries for such an evolving technology are those dealing in;

  • Taxi Services
  • Ride-Hailing Apps
  • On-demand food delivery apps
  • Retail & FMCG on eCommerce platforms
  • Ecommerce Businesses

Route optimization software adoption across retail and FMCG drives the market growth

The market segmentation of the end-user industry utilizing route optimization software includes home care service providers, taxi apps, FMCG, Retail, and others. We have already seen how food delivery businesses like Zomato, Uber Eats, and Swiggy uses food delivery management software to offer timely delivery to users.

by industry vertical

The same is expected to take the FMCG and retail industry by storm. It is quite interesting to note that FMCG and Retail Apps are key segments on which the route optimization software thrives on as it is witnessing a significant adoption.

There a few on-premises developments expected to capture the larger market share in the coming time. Customized route optimization software can help address complex business requirements while also enabling security and data control. Moreover, the adoption of cloud deployment is likely to witness higher growth in the next five years’ time as it offers scalability with added cost benefits.

The FMCG and Retail sector is gradually hitting the digital world as users prefer to choose mobile apps for buying groceries, daily essentials, and even fashion. While the retail industry can do away with urgency, the FMCG needs to ship perishable items sometimes and that’s why it requires to cut down the delivery time. It is possible to achieve this phenomenal delivery feat by leveraging the best delivery route planning software.

One more reason why the field services segment will hit the highest CAGR from 2020 to 2025 is that the route vitality matters. It allows delivery partners to finish complete multiple jobs within the given time.

market regional analysis

The manufacturers, retailers and wholesalers can collectively benefit using the route optimization software. Using it can enable them to better track the deliveries and optimize omnichannel strategies while plummeting the cost to service that drives efficiency. The result is an enhanced service that elevates the user experience to increase operational efficiency and offer improved customer satisfaction.

The retail sector is expected to deploy route optimization software that helps track fleet and assets while optimizing the route based on customer visit patterns, frequency of visits, and seasonal variations. Also, dynamic route planning regularly becomes a feasible option that helps to choose optimal multi-depot visits for transit vehicles.

Conclusion

The route optimization software segment is bound to witness one of the highest market shares in the forecast period. There is much demand for training and consulting in route optimization, indicating a stark rise in the industry. It is best to plan the future of your business around route optimization software to ensure you make the most out of the technology and help grow your business in the coming times.

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