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Fulfillment source allocation, inventory transshipment, and customer order transfer in e-tailing

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  • Torabi, S.A.
  • Hassini, E.
  • Jeihoonian, M.

Abstract

We consider an inventory fulfillment-allocation and transshipment problem in an e-tailing environment. For a typical e-tailer, each customer demand is fulfilled from the closest fulfillment center if there are enough inventories. Otherwise, the e-tailer would transship stock from a nearby facility or transfer the customer order so it is fulfilled from another facility, depending on the economics of transportation. We develop a mixed-integer programming model to help e-tailers optimally fulfill customer orders while minimizing logistics costs. We propose a Benders decomposition-based approach to efficiently find optimal solutions. Our computational results demonstrate the importance of considering inventory transshipments in online deliveries.

Suggested Citation

  • Torabi, S.A. & Hassini, E. & Jeihoonian, M., 2015. "Fulfillment source allocation, inventory transshipment, and customer order transfer in e-tailing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 79(C), pages 128-144.
    • Handle: RePEc:eee:transe:v:79:y:2015:i:c:p:128-144
    DOI: 10.1016/j.tre.2015.04.004
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    7. Ting Qu & Tianxiang Huang & Duxian Nie & Yelin Fu & Lin Ma & George Q. Huang, 2022. "Joint Decisions of Inventory Optimization and Order Allocation for Omni-Channel Multi-Echelon Distribution Network," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
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    9. Seifried, K. & Agatz, N.A.H. & Fleischmann, M., 2019. "On the Benefits of Flexible Customer-to-Depot Assignments in Attended Home Delivery," ERIM Report Series Research in Management ERS-2019-004-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    10. Feng, Pingping & Wu, Feng & Fung, Richard Y.K. & Jia, Tao, 2018. "Evaluation of two transshipment policies in a two-location decentralized inventory system under partial backordering," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 207-224.
    11. Pichka, Khosro & Alwan, Layth C. & Yue, Xiaohang, 2022. "Fulfillment and pricing optimization for omni-channel retailers considering shipment of in-store demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
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    13. Elleuch Fadoi & Semi Boudabbous, 2021. "Application of Transshipment in the Supply Chain Management in Tunisia," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 11(4), pages 81-103.
    14. Fadoi Elleuch, 2023. "The "Lateral Transshipment" Is a Cooperative Tool for Optimizing the Profitability of a Distribution System," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(1), pages 128-151.
    15. Zhang, Peng & Xu, Xiaofeng & Shi, Victor & Zhu, Jing, 2020. "Simultaneous inventory competition and transshipment between retailers," International Journal of Production Economics, Elsevier, vol. 230(C).
    16. Hu, Shu & Yu, Dennis Z. & Fu, Ke, 2023. "Online platforms’ warehouse capacity allocation strategies for multiple products," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    17. Yajun Zhan & Yiping Jiang, 2022. "Integrated Optimization of Order Allocation and Last-Mile Multi-Temperature Joint Distribution for Fresh Agriproduct Community Retail," Sustainability, MDPI, vol. 14(15), pages 1-18, August.
    18. Barenji, Ali Vatankhah & Wang, W.M. & Li, Zhi & Guerra-Zubiaga, David A., 2019. "Intelligent E-commerce logistics platform using hybrid agent based approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 15-31.
    19. Li, Shuqin & Jia, Shuai, 2019. "A Benders decomposition algorithm for the order fulfilment problem of an e-tailer with a self-owned logistics system," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 463-480.
    20. Millstein, Mitchell A. & Bilir, Canser & Campbell, James F., 2022. "The effect of optimizing warehouse locations on omnichannel designs," European Journal of Operational Research, Elsevier, vol. 301(2), pages 576-590.
    21. Fikar, Christian & Mild, Andreas & Waitz, Martin, 2021. "Facilitating consumer preferences and product shelf life data in the design of e-grocery deliveries," European Journal of Operational Research, Elsevier, vol. 294(3), pages 976-986.
    22. Difrancesco, Rita Maria & van Schilt, Isabelle M. & Winkenbach, Matthias, 2021. "Optimal in-store fulfillment policies for online orders in an omni-channel retail environment," European Journal of Operational Research, Elsevier, vol. 293(3), pages 1058-1076.
    23. Ardjmand, Ehsan & Sanei Bajgiran, Omid & Rahman, Shakil & Weckman, Gary R. & Young, William A., 2018. "A multi-objective model for order cartonization and fulfillment center assignment in the e-tail/retail industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 16-34.
    24. Zümbül Atan & Lawrence V. Snyder & George R. Wilson, 2018. "Transshipment policies for systems with multiple retailers and two demand classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(1), pages 159-186, January.

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