On the Benefits of Flexible Customer-to-Depot Assignments in Attended Home Delivery

Abstract

This paper investigates the value of flexibility in customer-to-depot assignments in last-mile distribution operations. In current practice, many companies use fixed delivery regions for their fulfillment warehouses. This allows a decomposition of delivery operations by ware- house, thereby simplifying the planning process. However, this approach foregoes some optimization potential, relative to a holistic planning of the delivery operations across the network.

In this paper, we assess the value of this flexibility. We first identify and characterize two specific types of benefits, namely a routing benefit and a pooling benefit. We then proceed to quantify these benefits in an extensive numerical study. Our results disentangle how the benefits depend on key environmental parameters. They also show that a flexible customer-to-depot assignment can add significant value in various relevant conditions.

Keywords: routing, multiple depots, time windows, attended home delivery