Coordinate Package Delivery and On-Demand Rides: A Zoning Policy and Analysis

Abstract

Cities are facing mounting pressure from the surging demand for package delivery and on-demand ride services. Meanwhile, more drivers are empowered by platforms to provide flexible transportation and logistics services with their own vehicles. Integrating freight and passenger transportation services, termed co-modality, has been promoted as a promising means to improve vehicle utilization, driver productivity, and logistics efficiency. Motivated by these issues, we investigate the value of co-modality in the context of joint package delivery and ride-hailing from a revenue-maximizing perspective. Central to our work is the question: When does coordinating package delivery and on-demand rides prove advantageous? To answer this question, we develop a zoning-based coordination policy that allows us to capture the synergies between these two types of jobs and characterize its revenue performance analytically. We find that the optimal policy reduces to three forms: the pure package delivery policy, the four-zone policy (limited ride opportunity), and the switching policy (flexible ride opportunity). We show that co-modality is most beneficial when the package volume is relatively low. Offering limited flexibility is optimal when the ride profit and package volume are moderate. In the limit, the coordination policy scales similarly to the pure package delivery policy. We also complement our analysis using numerical studies based on taxi data from New York City and discuss the practical implications.

Keywords: logistics, co-modality, ride-hailing, transportation