Optimizing Omni-Channel Fulfillment with Store Transfers

30 Pages Posted: 2 Jan 2019

See all articles by Joydeep Paul

Joydeep Paul

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Niels Agatz

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Martin Savelsbergh

Georgia Institute of Technology - College of Engineering

Date Written: December 15, 2018

Abstract

The presence of different distribution channels in omni-channel retail makes the fulfillment process challenging. When consumers can buy online and pick up their purchased goods at a store, the stores are often visited by a vehicle that supplies the pick-up points (PUPs) and by a vehicle that replenishes the store's inventory. We study the benefit of exploiting any spare capacity in the vehicles replenishing store inventories to reduce online order fulfillment cost by transferring online orders to these vehicles at one or more of the stores visited. This involves choosing transfer locations and the set of stores whose online orders are transferred at these locations so as to minimize the online order fulfillment cost. We present a mixed integer linear programming model as well as an effective and efficient heuristic for solving this problem. An extensive computational study shows that significant benefits can be achieved by sharing capacity across the two channels.

Keywords: Transportation; Routing; Capacity sharing; Store transfers; Omni-channel retail; Heuristics

Suggested Citation

Paul, Joydeep and Agatz, Niels A.H. and Savelsbergh, Martin, Optimizing Omni-Channel Fulfillment with Store Transfers (December 15, 2018). Available at SSRN: https://ssrn.com/abstract=3302521 or http://dx.doi.org/10.2139/ssrn.3302521

Joydeep Paul (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T09-36
Rotterdam, 3000 DR
Netherlands
+31104082289 (Phone)

HOME PAGE: http://www.rsm.nl/people/joydeep-paul/

Niels A.H. Agatz

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Martin Savelsbergh

Georgia Institute of Technology - College of Engineering ( email )

Atlanta, GA 30332
United States

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