Multi-item Online Order Fulfillment in a Two-Layer Network

Yanyang Zhao (), Xinshang Wang () and Linwei Xin ()
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Yanyang Zhao: Booth School of Business, University of Chicago, Chicago, Illinois 60637
Xinshang Wang: Alibaba Group, Bellevue, Washington 98004
Linwei Xin: Booth School of Business, University of Chicago, Chicago, Illinois 60637

Operations Research, 2025, vol. 73, issue 5, 2297-2305

Abstract: The global e-commerce boom has driven rapid expansion of fulfillment infrastructure, with e-retailers building more warehouses to offer faster deliveries. However, fulfillment costs have surged over the past decade. This paper addresses the problem of minimizing these costs, where an e-retailer must decide in real time which warehouse(s) will fulfill each order, considering inventory constraints. Orders can be split among warehouses at an additional cost. We focus on a regional distribution center (RDC)–front distribution center (FDC) distribution network used by major e-retailers, which consists of larger RDCs and smaller FDCs. We analyze the performance of a simple myopic policy that selects the least expensive fulfillment option for each order without considering future impacts. We provide theoretical bounds on the performance ratio of the myopic policy compared with an optimal clairvoyant policy and demonstrate the strengths of the myopic policy within this two-layer network.

Keywords: Operations; and; Supply; Chains; e-commerce; real-time order allocation; multi-item order; order split; fulfillment; myopic policy; competitive ratio; front distribution center; regional distribution center; two-layer network (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:73:y:2025:i:5:p:2297-2305

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