Configuration of last-mile distribution networks for an encroaching manufacturer

Nail Tahirov, Najmaddin Akhundov, Simon Emde and Christoph H. Glock

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

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.

Date: 2025-09-22
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Published in Annals of Operations Research 2-3 (2025-09-22) : pp. 679-720

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https://tuprints.ulb.tu-darmstadt.de/29130
https://doi.org/10.1007/s10479-024-06031-3

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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:157242

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