Using an integrated order picking-vehicle routing problem to study the impact of delivery time windows in e-commerce

Abstract

European e-commerce sales are increasing every year. Nowadays, customers buy more frequently online in smaller quantities. Handling this large amount of customer orders puts the logistic activities of the supply chain under pressure. At the same time, customers have high expectations concerning the delivery of their online purchase. In order to meet these expectations at low cost, B2C e-commerce companies have to reconsider their logistic activities. Instead of optimizing every single process of the supply chain, related problems need to be tackled simultaneously. In the integrated order picking-vehicle routing problem(I-OP-VRP), picking lists and vehicle routes are determined simultaneously. One possibility to meet the high expectations of customers is to allow customers to choose the time window in which they want to be delivered. However, the more customers select a time window during the purchasing process, the higher the total costs for the B2C e-commerce company since the company has less flexibility to construct their delivery routes. To cover the cost increase, e-commerce companies often only provide this service at an additional cost. The objective of this paper is to estimate the additional cost of allowing customers to choose a preferred delivery time window using the integrated order picking-vehicle routing problem. An experimental design is set up to investigate this service cost under varying circumstances depending on customer characteristics, time window characteristics and operator size. Based on the results of the ANOVA it can be concluded that the investigated factors have a significant influence on the additional cost of allowing customers to select a delivery time window.