Dynamic demand management and online tour planning for same-day delivery

Vienna Klein and Claudius Steinhardt

European Journal of Operational Research, 2023, vol. 307, issue 2, 860-886

Abstract: For providers to stay competitive in a context of continued growth in e-retail sales and increasing customer expectations, same-day delivery options have become very important. Typically, with same-day delivery, customers purchase online and expect to receive their ordered goods within a narrow delivery time span. Providers thus experience substantial operational challenges to run profitable tours and generate sufficiently high contribution margins to cover overhead costs. We address these challenges by combining a demand-management approach with an online tour-planning approach for same-day delivery. More precisely, in order to reserve capacity for high-value customer orders and to guide customer choices toward efficient delivery operations, we propose a demand-management approach that explicitly optimizes the combination of delivery spans and prices which are presented to each incoming customer request. The approach includes an anticipatory sample-scenario based value approximation, which incorporates a direct online tour-planning heuristic. It does not require extensive offline learning and is scalable to realistically sized instances with multiple vehicles. In a comprehensive computational study, we show that our anticipatory approach can improve the contribution margin by up to 50% compared to a myopic benchmark approach. We also show that solving an explicit pricing optimization problem is a beneficial component of our approach. More precisely, it outperforms both a pure availability control and a simple pricing rule based on opportunity costs. The latter idea is one used in other approaches for related dynamic pricing problems dealt with in the literature.

Keywords: Logistics; Same-day delivery; Last-Mile logistics; Demand management; Approximate dynamic programming (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:307:y:2023:i:2:p:860-886

DOI: 10.1016/j.ejor.2022.09.011

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