Vehicle Routing Problem: Types, Challenges, and How to Solve

Efficient delivery is no longer a nice-to-have; it’s a competitive necessity. Behind every on-time package or grocery drop is a complex puzzle known as the Vehicle Routing Problem (VRP). For last-mile delivery businesses, this challenge is relentless. With dozens or even hundreds of orders, limited vehicle capacity, and tight delivery windows, planning optimal routes—essentially addressing what is vehicle routing in practice—becomes a daily logistical headache.

Solving VRP isn’t just about saving fuel. It’s about cutting operational costs, maximizing fleet productivity, and delivering the seamless experience customers expect. As delivery volumes continue to rise, the urgency to solve this problem quickly and intelligently is greater than ever.

What is a Vehicle Routing Problem in Logistics?

Vehicle Routing Problem focuses on determining optimal routes for a fleet of vehicles given operational constraints like time window, route length, etc. It helps fleet managers plan routes that can maximize the efficiency of the fleet and minimize the last-mile delivery costs.  

VRP is a generalization of the Travelling Salesman Problem (TSP). TSP attempts to find the shortest route for the salesperson or vehicle to visit all destinations and return to the starting point.

Example: 

A delivery business has to complete 2000 deliveries with 40 vehicles a day. How do they assign the deliveries to drivers and plan the order of visits? They should plan routes taking into account various delivery constraints like fuel consumption, traffic jams, time windows, and so on. 

Improper handling of these constraints makes last-mile delivery operations complicated and costly.

Travelling Salesman Problem Is Not A Problem, It’s A Herculean Task.

What are The Different Types of Vehicle Routing Problems?

The Vehicle Routing Problem (VRP) isn’t a one-size-fits-all challenge. In the real world, delivery operations come with a wide range of constraints: vehicle capacity, time restrictions, pickup/drop-off demands, and more. To handle these complexities, several variations of VRP have been developed. Each variation reflects a specific logistical challenge and requires a unique optimization strategy.

Let’s explore the most common types of VRPs that logistics professionals encounter.

1. Capacitated Vehicle Routing Problem (CVRP)

This is the most basic and widely applicable version of VRP. In CVRP, each vehicle has a limited carrying capacity, and each delivery location has a known demand. The goal is to determine routes that fulfill all demands without exceeding any vehicle’s capacity, while minimizing travel distance or cost.

Real-world scenarios:

• Delivery trucks carrying parcels, groceries, or supplies
• Waste collection vehicles picking up loads across a region
• Service fleets constrained by equipment or part storage limits
• Fuel distribution where trucks carry a fixed volume of fuel

CVRP is particularly important in industries where overloading vehicles is not just inefficient, it’s also unsafe or illegal.

2. Vehicle Routing Problem with Time Windows (VRPTW)

In this variation, every customer or location must be visited within a specific time frame. Vehicles need to be routed not only efficiently, but also in a way that respects these delivery or service windows. This adds an extra layer of complexity to traditional VRP.

Use cases include:

• On-demand delivery platforms (e.g., food or groceries)
• Scheduled home service appointments (e.g., repairs, maintenance)
• School or employee shuttle services with fixed pickup times
• Healthcare visits with pre-arranged time slots

VRPTW is critical for businesses focused on on-time performance and customer satisfaction, where early or late arrivals could lead to service failures or penalties.

3. Vehicle Routing Problem with Pickup and Delivery (VRPPD)

Here, each vehicle needs to perform both pickup and drop-off tasks during the same route. This involves pairing pickup points with corresponding delivery points and ensuring that the vehicle never exceeds its capacity at any point in the journey.

Typical applications:

• Courier and logistics providers handling return shipments
• Retail supply chains moving inventory between stores and warehouses
• Furniture or appliance delivery teams picking up items from a depot and delivering them to homes
• Healthcare and pharmaceutical deliveries with item returns or exchanges

VRPPD requires careful sequencing to manage both the pickup and delivery in a single, efficient route while balancing the load dynamically.

Why solve vehicle routing problem?

Solving the Vehicle Routing Problem (VRP) is far more involved than simply finding the shortest path between stops. In real-world logistics, route planning must account for a variety of constraints, such as vehicle capacity, delivery time windows, driver schedules, and service priorities. These variables quickly multiply the complexity of the problem, making manual planning virtually impossible, even for experienced dispatchers.

What makes VRP especially challenging is its unpredictable nature. Traffic conditions, last-minute order changes, road closures, and other real-time disruptions introduce a level of uncertainty that static plans cannot handle. As the number of stops increases, so do multiple- route combinations, which requires significant computational effort to evaluate efficiently. Without the right tools, finding a cost-effective and practical solution becomes a major logistical challenge.

This is why having an effective VRP solution in place is critical. At its core, solving VRP helps reduce logistics costs by cutting unnecessary travel time, fuel usage, and labor hours. But the benefits go further. An optimized routing strategy improves overall fleet efficiency, enables businesses to scale operations more smoothly, and helps meet delivery commitments with greater consistency. All of this contributes to a better customer experience, higher satisfaction rates, and ultimately, stronger profitability. In a competitive market where speed and reliability are essential, solving the VRP becomes a key driver of sustainable growth.

What is the most effective solution to address VRP? 

There are several ways to approach the Vehicle Routing Problem (VRP), but not all of them work well in real-life situations. Some methods are outdated or too basic, while others are more advanced and suitable for modern logistics challenges.

Manual Planning

Some businesses still try to solve VRP manually. This means fleet managers or dispatchers use spreadsheets, maps, or their own experience to create routes. While this might work for a small number of deliveries, it quickly becomes overwhelming as the number of stops or constraints increases. Manual planning often leads to inefficient routes, higher costs, and more delays.

Basic or Preset Solvers

Another approach is using preset solvers or simple optimization tools. These methods are often used in academic research or very basic delivery models. While they can solve small or simple problems, they struggle with real-world complexity. They usually cannot handle things like last-minute order changes, live traffic, or vehicle limitations, making them unreliable for most delivery businesses.

Advanced Algorithmic Methods

Modern VRP solutions use smart algorithms to handle complex delivery scenarios. These include:

• Heuristics, which give quick but basic solutions
• Metaheuristics, such as genetic algorithms or simulated annealing, which search through many possibilities to find better routes
• Hybrid approaches, which combine different techniques for better accuracy
• Local search methods, which make small changes to improve existing routes

These methods are designed to balance speed and accuracy, and they can handle many constraints at once. However, using them effectively requires the right technology.

The Best Choice: Route Optimization Software

The most effective way to solve VRP today is by using route optimization software. These platforms are built to handle complex delivery operations. They combine advanced algorithms with real-time data and business rules to create smart, efficient routes.

Route optimization software can take into account:

• Vehicle capacity
• Time windows for deliveries
• Live traffic conditions
• Order changes or cancellations
• Multiple depots or drop-off points

Businesses can cut down on travel time, reduce fuel use, improve delivery accuracy, and serve more customers in less time by using this technology. It helps make fleet operations more productive, cost-effective, and scalable. In short, route optimization software is not just the best way to solve the Vehicle Routing Problem, it is the only practical way to do it well in today’s fast-moving logistics world.

Key features to look for in Route Optimization Software

Choosing the right route optimization software is essential for solving the Vehicle Routing Problem effectively. A powerful solution should go beyond generating routes; it should adapt to real-world constraints, reduce manual planning, and improve overall delivery performance.

The best route optimization platforms are designed to automate complex decision-making using advanced algorithms that consider vehicle types, capacities, traffic conditions, delivery time windows, stop durations, and more. With minimal human input, they can generate smart, cost-effective routes that save time, fuel, and effort.

When evaluating a route planning solution, look for the following key features:

• Automated Route Planning
  The software should use advanced algorithms to generate efficient routes automatically, considering all relevant constraints like vehicle capacity, time windows, and traffic.
• Scalability and Cost-Effectiveness
  It should grow with your business, handling everything from small local deliveries to complex, large-scale fleet operations without driving up costs.
• Intelligent Order Allocation
  A system that can prioritize and assign deliveries based on urgency, location, and available resources helps fleet managers plan more effectively.
• Dynamic Rerouting
  As new or urgent orders come in, the software should automatically adjust existing routes to accommodate changes without manual intervention.
• Multi-Vehicle and Multi-Stop Planning
  Support for multiple vehicles and stops ensures efficient routing across the entire fleet, especially in high-volume or regionally distributed operations.
• Advanced Geocoding Capabilities
  The ability to accurately process and correct address data helps reduce delivery errors and delays caused by unclear or inconsistent addresses.
• Real-Time Tracking
  Visibility into vehicle locations enables managers to monitor progress, address delays proactively, and keep customers informed about delivery times.
• Electronic Proof of Delivery (e-POD)
  Digital confirmation features such as photo capture or electronic signatures reduce paperwork, improve accuracy, and support contactless delivery options.
• Low Dependency on Manual Effort
  The system should require minimal human intervention, reducing the risk of human error and saving time for planners and drivers alike.

How does route optimization software solve the Vehicle Routing Problem?

Route optimization boosts the efficiency of delivery businesses in the following ways: 

Helps Manage resource limitations

Logistics businesses face resource constraints, especially during this COVID-19 situation. The best way for logistics businesses to manage this is by using vehicle route optimization software. It enables them to quickly plan optimal routes and accommodate more deliveries even if they have limited drivers or vehicles.  

Saves fuel on multiple routes and multiple vehicles 

Vehicles attending to multiple stops spend more time on the road, leading to increased fuel consumption. Vehicle Route optimization helps fleet drivers save money, time, and fuel. 

Helps reduce last-mile costs 

The primary aim of all delivery companies is to reduce their last-mile delivery costs. Vehicle Route optimization software helps reduce various last-mile delivery costs like idling and maintenance costs. 

Enables on-time deliveries 

An efficient route optimization solution helps fleet drivers to reach different destination points as quickly as possible. 

On-Time and In-Full Delivery: Why Balancing Both is Important for You

Enables better customer experience 

The efficiency of drivers determines the quality of the delivery service. Vehicle Route optimization software helps fleet managers track drivers’ performance and suggest changes required so as to enable a better customer experience. 

Check out the case study: How Locus enable better customer experience through with route optimization.

Conclusion 

Route optimization software helps delivery businesses to adjust their routes instantly and meet unanticipated requests from customers. It efficiently solves the Vehicle Routing Problem and therefore enables a great customer experience. 

Locus’ Route Optimization software provides the best features that can solve the Vehicle Routing Problem effectively. It enhances customer experience and reduces your logistics costs.