Order Fulfillment and Logistics Considerations for Multichannel Retailers
This paper addresses the challenge of making multichannel decisions for order fulfillment and logistics. We present a framework for multichannel strategies consisting of seven elements. Some channel decisions are part of the marketing mix, with the ultimate choice left to the customer. Other channel decisions concern logistics activities and can be made, for example, based on efficiency measures. We study the situation of a Dutch retailer that sells large household items (e.g. appliances or furniture). Inventories of products are available at the stores as well as at the central warehouse. Customers can select and order the products in the store; the store then delivers the products to the customers’ homes, since the items are typically considered too big to be transported by the customers themselves. Recently, a distribution network was added to deliver products from the central warehouse to customers in response to online orders. The two distribution networks are operated separately, as is common at many retailers. We model the company’s logistics operation by means of a variant on the Multi-Depot Vehicle Routing Problem to make dynamic channel assignments on a per customer basis. Our study aims at creating awareness of the wider portfolio of multichannel decisions, at stimulating dynamic assignment of orders to available channels, and at providing case-based evidence of the potential gains of such a strategy.
KeywordsDistribution Vehicle routing E-commerce Multi-channel
This study was supported by a grant of the Dutch Institute for Advanced Logistics (Dinalog).
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