add instructions on hosting arch-router locally (#819)

demos/llm_routing/preference_based_routing/README.md

@@ -32,6 +32,37 @@ planoai up config.yaml
 
 3. Test with curl or open AnythingLLM http://localhost:3001/
 
+## Running with local Arch-Router (via Ollama)
+
+By default, Plano uses a hosted Arch-Router endpoint. To self-host Arch-Router locally using Ollama:
+
+1. Install [Ollama](https://ollama.ai) and pull the model:
+```bash
+ollama pull hf.co/katanemo/Arch-Router-1.5B.gguf:Q4_K_M
+```
+
+2. Make sure Ollama is running (`ollama serve` or the macOS app).
+
+3. Start Plano with the local config:
+```bash
+planoai up plano_config_local.yaml
+```
+
+4. Test routing:
+```bash
+curl -s "http://localhost:12000/routing/v1/messages" \
+  -H "Content-Type: application/json" \
+  -d '{
+    "model": "gpt-4o-mini",
+    "max_tokens": 1024,
+    "messages": [
+      {"role": "user", "content": "Create a REST API endpoint in Rust using actix-web"}
+    ]
+  }'
+```
+
+You should see the router select the appropriate model based on the routing preferences defined in `plano_config_local.yaml`.
+
 # Testing out preference based routing
 
 We have defined two routes 1. code generation and 2. code understanding