Response Strategies for Demand Surges in Last-Mile Logistics: Managing Delivery Efficiency in Volatile Environments

Abstract

Last-mile logistics firms are facing increasingly volatile environments in which they must constantly cope with demand fluctuations. This study provides insights into how last-mile logistics firms can effectively respond to sudden demand surges caused by unexpected events. Based on the literature review and practitioner interviews, we identify six popular last-mile logistics response strategies and compare their effectiveness. We first develop a theoretical framework that can assess the effectiveness of multiple response strategies systematically by utilizing a well-known transport economics theory, economies of scale. We then conduct a series of simulation experiments to (1) empirically evaluate the performance of the six strategies using our framework and (2) examine if the best-performing strategy(s) differs from one operating condition to another using the contingency theory perspective. Results suggest that many popular strategies used in practice are “non-viable” ones that can result in diseconomies of scale and reduce firms' competitiveness. Results also suggest that the set of “best” and “viable” strategies that can bring competitive advantages to firms varies from one firm to another depending on the firm's operating conditions.