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Configuration of last-mile distribution networks for an encroaching manufacturer

Author

Listed:
  • Nail Tahirov

    (University of Zurih)

  • Najmaddin Akhundov

    (University of Houston)

  • Simon Emde

    (Friedrich-Schiller-Universität Jena)

  • Christoph H. Glock

    (Technical University of Darmstadt)

Abstract

The surge of e-commerce has revolutionized distribution channels, escalating from simple single-channel frameworks to complex multi-channel and omni-channel networks. In particular developments in information technology and rising customer expectations have popularized the transition from multi- to omni-channel distribution, where the classic brick-and-mortar stores can also be part of the omni-channel distribution strategy. This evolution poses intricate challenges for manufacturers, especially in the integration and optimization of these channels. Thus, there is a strong need for an in-depth analysis of how manufacturers navigate the transition across diverse distribution channels to meet the varying needs of different customer segments. To this end, we investigate single-, multi-, and omni-channel distribution strategies for the case of a manufacturer selling both standard and customized products to different customer segments with varying preferences. A central contribution of this research is the creation of an integrated optimization model that resolves a location-routing problem, designing a complex and realistic supply chain configuration suitable for an omni-channel distribution system. This model strategically serves to fragmented customer demands through multiple shopping and delivery options. The outcomes of our study indicate that an omni-channel distribution system is a viable approach, capable of serving more customer segments while simultaneously minimizing logistics costs. In addition, we offer a detailed analysis of the cost implications of in-store pickup versus home-delivery options, providing a comprehensive evaluation of their respective impacts on total logistics costs and customer responsiveness.

Suggested Citation

  • Nail Tahirov & Najmaddin Akhundov & Simon Emde & Christoph H. Glock, 2025. "Configuration of last-mile distribution networks for an encroaching manufacturer," Annals of Operations Research, Springer, vol. 344(2), pages 679-720, January.
    • Handle: RePEc:spr:annopr:v:344:y:2025:i:2:d:10.1007_s10479-024-06031-3
    DOI: 10.1007/s10479-024-06031-3
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