An integrated optimization for minimizing the operation cost of home delivery services in O2O retail

Abstract

During the spread of the epidemic, the home delivery service (HDS) has been quickly introduced by retailers which helps customers avoid the risk of viral infection while shopping at offline stores. However, the operation cost of HDS is a huge investment for O2O retailers. How to minimize the operating costs of HDS is an urgent issue for the industry. To solve this problem, we outline those management decisions of HDS that have an impact on operating costs, including dynamic vehicle routing, driver sizing and scheduling, and propose an integrated optimization model by comprehensively considering these management decisions. Moreover, the dynamic feature of online orders and the heterogeneous workforces are also considered in this model. To solve this model, an efficient adaptive large neighborhood search (ALNS) and branch-and-cut algorithms are developed. In the case study, we collected real data from a leading O2O retailer in China to assess the effectiveness of our proposed model and algorithms. Experimental results show that our approach can effectively reduce the operating costs of HDS. Furthermore, a comprehensive analysis is conducted to reveal the changing patterns in operating costs, and some valuable management insights are provided for O2O retailers. The theoretical and numerical results would shed light on the management of HDS for O2O retailers.