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Strategic decisions on the establishment of an offshore warehouse for manufacturers with an e-commerce channel

Author

Listed:
  • Yongzhong Wu
  • Qiran Wang
  • Yongwu Zhou
  • Mianmian Huang

Abstract

While Chinese manufacturers increasingly use cross-border e-commerce platforms to sell products to overseas customers, international express delivery is commonly used to meet the requirement of short order-to-delivery time for the online end customers. In order to reduce the logistics cost while meeting the service level, many manufacturers are considering renting or constructing an offshore warehouse. Goods are shipped in bulk to the offshore warehouse in advance and the daily customer orders are fulfilled by the warehouse inventory. Strategic decisions arise regarding the need for as well as the location and capacity of an offshore warehouse. This paper establishes a dedicate discrete-event simulation model to analyse these strategic decisions with considerations of key variables in different scenarios, including the order arrival rate, inventory cost and warehouse costs. The optimal inventory policy of the offshore warehouse is obtained via a metaheuristic method embedded in the simulation model. Experiments and sensitivity analysis are conducted to evaluate the impact of the key variables on the strategic decisions. The established model provides a systematic method for the decision-making regarding the optimal design of offshore warehouses for the fast-growing cross-border e-commerce industry.

Suggested Citation

  • Yongzhong Wu & Qiran Wang & Yongwu Zhou & Mianmian Huang, 2021. "Strategic decisions on the establishment of an offshore warehouse for manufacturers with an e-commerce channel," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 38(2), pages 239-262.
    • Handle: RePEc:ids:ijisen:v:38:y:2021:i:2:p:239-262
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