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Business-to-Consumer E-Commerce: Home Delivery in Megacities

Yixiao Huang (huangyx12***at***mails.tsinghua.edu.cn)
Martin Savelsbergh (martin.savelsbergh***at***isye.gatech.edu)
Lei Zhao (lzhao***at***tsinghua.edu.cn)

Abstract: To deliver to consumers in densely populated urban areas, companies often employ a two-echelon logistics system. In a two-echelon logistics system, the entry point for goods to be delivered in the urban area is a city distribution center (CDC). From a CDC the goods are transported to an intermediate facility, from where the goods are delivered to the consumers. By restricting the set of potential vehicle routes employed in one or both of the echelons, it is possible to significantly reduce the complexity of the delivery operations, which is a common practice in real-life environments. We study the impact on delivery costs of such strategies and demonstrate that when the number of orders to be delivered is large and the location density of delivery addresses is high, such strategies can have near-optimal performance. To more easily accommodate delivery volume growth and to more effectively handle daily delivery volume variations, we introduce a simple aggregation concept, which leads to further quality improvements. We provide further insight by means of a worst-case analysis for a specific geographic topology.

Keywords: megacities; business-to-consumer e-commerce; city logistics; two-echelon vehicle routing

Category 1: Applications -- OR and Management Sciences (Transportation )


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Entry Submitted: 08/17/2017
Entry Accepted: 08/17/2017
Entry Last Modified: 08/31/2017

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