IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v323y2025i2p642-656.html
   My bibliography  Save this article

Optimal fulfillment and replenishment for omnichannel retailers with standard shipping contracts

Author

Listed:
  • Arslan, Bartu
  • Schrotenboer, Albert H.
  • Atan, Zümbül

Abstract

E-commerce sales rise exponentially and represent an increasing proportion of global retail. To benefit from this, traditional brick-and-mortar stores enter the e-commerce market and become omnichannel retailers. However, the profitability of omnichannel retailers remains questionable due to high shipment and fulfillment costs. This paper addresses this challenge, focusing on using standard shipping contracts as a potential solution. Such contracts promise delivery within a given number of periods. Once a customer orders, the retailer should set a delivery period. In this way, retailers are flexible in setting exact delivery days, providing an opportunity for jointly optimizing product replenishment and customer fulfillment. We provide a generic model for the use of standard shipping contracts and formulate it as a Markov decision process. We provide optimal solutions using a modified policy iteration algorithm. Our results show that using standard shipping contracts creates a win-win situation: It increases profits and customer service. The observed profit increase is directly linked to maintaining less on-hand inventory. This effect is more pronounced for higher valued products and longer replenishment lead times. Additionally, we propose a heuristic policy that performs within 4% of the optimal policy.

Suggested Citation

  • Arslan, Bartu & Schrotenboer, Albert H. & Atan, Zümbül, 2025. "Optimal fulfillment and replenishment for omnichannel retailers with standard shipping contracts," European Journal of Operational Research, Elsevier, vol. 323(2), pages 642-656.
  • Handle: RePEc:eee:ejores:v:323:y:2025:i:2:p:642-656
    DOI: 10.1016/j.ejor.2024.11.051
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221724009421
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ejor.2024.11.051?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:323:y:2025:i:2:p:642-656. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.