Omnichannel facility location and fulfillment optimization

Yun Hui Lin, Yuan Wang, Loo Hay Lee and Ek Peng Chew

Transportation Research Part B: Methodological, 2022, vol. 163, issue C, 187-209

Abstract: E-commerce has been evolving towards omnichannel as we have witnessed many once pure e-retailers opening physical stores or showrooms to enable customers to inspect the product and quickly assess product fit. In omnichannel transportation operations, these stores can strategically fulfill online orders to improve delivery efficiency and reduce transportation costs. Motivated by this trend, this paper studies a pure e-retail company that plans to introduce the offline channel with physical stores and practice omnichannel distribution. For the e-retailer, opening stores can benefit from the reduced transportation cost and the increased revenue, both of which inherently depend on how customers choose channels and stores to make purchases. To this end, we employ a discrete choice model to estimate customers’ choices and then propose a modeling framework that jointly optimizes the location of stores and the omnichannel fulfillment strategy to maximize the profit, accounting for the revenue, the transportation cost, and the fixed operating cost of stores. To solve the model of practical scale, we develop a branch-and-cut algorithm, which leverages Benders cuts that are generated on-the-fly using two analytical separation functions. Our computational studies suggest that the proposed algorithm is efficient for solving large-scale problems. Finally, we conduct sensitivity analysis and draw insightful observations.

Keywords: Omnichannel retailing; Omnichannel fulfillment; Facility location; Transportation; Discrete choice model (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0191261522001175
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:transb:v:163:y:2022:i:c:p:187-209

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

DOI: 10.1016/j.trb.2022.07.005

Access Statistics for this article

Transportation Research Part B: Methodological is currently edited by Fred Mannering

More articles in Transportation Research Part B: Methodological from Elsevier
Bibliographic data for series maintained by Catherine Liu ().