Split-order consolidation optimization for online supermarkets: Process analysis and optimization models

Abstract

The large-scale online supermarket is a newly emerging online retailing mode which brings great convenience to people. Online supermarkets are characterized by having large amounts of daily orders with potentially multiple items, diverse delivery times, and a high order-split rate. Multiple shipments for one order caused by order splitting result in high cost and disturbance and a large number of discarded consumable packages at online retailers and customers, causing severe damage to the environment. Accordingly, research on split-order consolidation fulfilment is critical for the advancement of the practice and theory in the context of highly complex online retailing. This paper first analyzes the characteristics and the challenges associated with the split-order consolidation problem that online supermarket is confronting and summarizes the new operational process of split-order consolidation fulfilment. Then, a time–space network optimization model is built, and its corresponding solution algorithm is presented to solve the questions of where and when to consolidate the split orders. Finally, the computation results of the numerical experiments are provided to verify the effectiveness of the algorithm, and a sensitivity analysis of the relevant parameters is performed. This work highlights the effect of order consolidation processes and fulfilment methods on the order fulfilment decision-making for online supermarkets. The purpose of this article is to help pave the way for more effective online supermarket management and order implementation.

Graphical abstract

Keywords

online supermarkets / split-order consolidation / time–space network / genetic algorithm

References

[1] Acimovic, J Graves, S C (2015). Making better fulfillment decisions on the fly in an online retail environment. Manufacturing & Service Operations Management, 17( 1): 34–51

[2] Acimovic, J Graves, S C (2017). Mitigating spillover in online retailing via replenishment. Manufacturing & Service Operations Management, 19( 3): 419–436

[3] Ardjmand, E Sanei Bajgiran, O Rahman, S Weckman, G R Young, II W 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, 115: 16–34

[4] Catalán, A Fisher, M (2012). Assortment allocation to distribution centers to minimize split customer orders. SSRN Electronic Journal, 2166687

[5] Co, H C Miller, R H Xu, X (2007). Clustering of SKUs to reduce split delivery cost and improve on-time delivery in online merchandising. California Journal of Operations Management, 6( 1): 45–51

[6] Feng, B Ye, Q (2021). Operations management of smart logistics: A literature review and future research. Frontiers of Engineering Management, 8( 3): 344–355

[7] Hall, R W (1987). Consolidation strategy: Inventory, vehicles and terminals. Journal of Business Logistics, 8: 57–73

[8] Huang, M Guo, Q Liu, J Huang, X (2018). Mixed model assembly line scheduling approach to order picking problem in online supermarkets. Sustainability, 10( 11): 3931

[9] Jasin, S Sinha, A (2015). An LP-based correlated rounding scheme for multi-item ecommerce order fulfillment. Operations Research, 63( 6): 1336–1351

[10] KökA GFisherM LVaidyanathanR (2015). Assortment planning: Review of literature and industry practice. In: Agrawal N, Smith S A, eds. Retail Supply Chain Management: Quantitative Models and Empirical Studies. Boston, MA: Springer, 175–236

[11] Lei, Y M Jasin, S Sinha, A (2018). Joint dynamic pricing and order fulfillment for ecommerce retailers. Manufacturing & Service Operations Management, 20( 2): 269–284

[12] Li, S Q Jia, S (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, 122: 463–480

[13] Naccache, S Montreuil, B (2015). Optimizing consumer order delivery consolidation in drop-ship based B2C distribution. IFAC-Papers OnLine, 48( 3): 1996–2001

[14] Nasiri, M M Rahbari, A Werner, F Karimi, R (2018). Incorporating supplier selection and order allocation into the vehicle routing and multi-cross-dock scheduling problem. International Journal of Production Research, 56( 19): 6527–6552

[15] Satir, B Erenay, F S Bookbinder, J H (2018). Shipment consolidation with two demand classes: Rationing the dispatch capacity. European Journal of Operational Research, 270( 1): 171–184

[16] Stenius, O Karaarslan, A G Marklund, J de Kok, A G (2016). Exact analysis of divergent inventory systems with time-based shipment consolidation and compound Poisson demand. Operations Research, 64( 4): 906–921

[17] 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, 79: 128–144

[18] WeiLJasinSKapuscinskiR (2017). Shipping consolidation with delivery deadline and expedited shipment options. Ross School of Business Paper No. 1375

[19] XuP J (2005). Order Fulfillment in Online Retailing: What Goes Where. Dissertation for the Doctoral Degree. Cambridge, MA: Massachusetts Institute of Technology

[20] Xu, P J Allgor, R Graves, S C (2009). Benefits of reevaluating real-time order fulfillment decisions. Manufacturing & Service Operations Management, 11( 2): 340–355

[21] Zhang, Y K Huang, M F Hu, X P Sun, L J (2018). Package consolidation approach to the split-order fulfillment problem of online supermarkets. Journal of the Operational Research Society, 69( 1): 127–141

[22] Zhang, Y K Lin, W H Huang, M F Hu, X P (2021). Multi-warehouse package consolidation for split orders in online retailing. European Journal of Operational Research, 289( 3): 1040–1055

[23] Zhang, Y K Sun, L J Hu, X P Zhao, C (2019). Order consolidation for the last-mile split delivery in online retailing. Transportation Research Part E: Logistics and Transportation Review, 122: 309–327

RIGHTS & PERMISSIONS

Higher Education Press