Configuration of last-mile distribution networks for an encroaching manufacturer

Nail Tahirov (), Najmaddin Akhundov (), Simon Emde () and Christoph H. Glock ()
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Nail Tahirov: University of Zurih
Najmaddin Akhundov: University of Houston
Simon Emde: Friedrich-Schiller-Universität Jena
Christoph H. Glock: Technical University of Darmstadt

Annals of Operations Research, 2025, vol. 344, issue 2, No 6, 679-720

Abstract: Abstract The surge of e-commerce has revolutionized distribution channels, escalating from simple single-channel frameworks to complex multi-channel and omni-channel networks. In particular developments in information technology and rising customer expectations have popularized the transition from multi- to omni-channel distribution, where the classic brick-and-mortar stores can also be part of the omni-channel distribution strategy. This evolution poses intricate challenges for manufacturers, especially in the integration and optimization of these channels. Thus, there is a strong need for an in-depth analysis of how manufacturers navigate the transition across diverse distribution channels to meet the varying needs of different customer segments. To this end, we investigate single-, multi-, and omni-channel distribution strategies for the case of a manufacturer selling both standard and customized products to different customer segments with varying preferences. A central contribution of this research is the creation of an integrated optimization model that resolves a location-routing problem, designing a complex and realistic supply chain configuration suitable for an omni-channel distribution system. This model strategically serves to fragmented customer demands through multiple shopping and delivery options. The outcomes of our study indicate that an omni-channel distribution system is a viable approach, capable of serving more customer segments while simultaneously minimizing logistics costs. In addition, we offer a detailed analysis of the cost implications of in-store pickup versus home-delivery options, providing a comprehensive evaluation of their respective impacts on total logistics costs and customer responsiveness.

Keywords: Omni-channel distribution; Location-routing problem; Manufacturer encroachment; Multi-channel supply chain; Last-mile delivery (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-024-06031-3

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