A Drone-Driven Delivery Network Design for an On-Demand O2O Platform Considering Hazard Risks and Customer Heterogeneity

Abstract

Nowadays, the online-to-offline (O2O) retailers provide on-demand delivery service for online orders by their own fleets and riders. An intelligent delivery network lays an important foundation to support cost-effective delivery service in the long run. Drones have great potential to revolutionize the instant delivery industry regarding cost and timeliness, while the hazard risks to humans and the environment should be seriously considered through sophisticated network design. In this paper, we propose a framework for a drone-driven intelligent delivery network design problem with the consideration of the multi-dimensional risk map, which needs to determine store location, drone fleet size and allocation, customer assignment, customer delivery mode selection, and delivery routing. A bi-objective non-linear programming model is formulated to maximize profit and minimize integrated risks as well. To tackle large instances, a modified NSGA-III algorithm is developed, which is incorporated with problem-specific search operators and Pareto local search to obtain Pareto solutions efficiently. Real-world data-based numerical experiments are conducted to verify the performance of the modified NSGA-III algorithm compared to the modified NSGA-II. A case study based on the geographical information in Shanghai is analyzed to validate the effectiveness of the proposed model. Moreover, sensitivity analysis is presented to evaluate the effects of multiple parameters on the drone delivery service network design. Some managerial insights are obtained for the O2O retailer who offers on-demand delivery service through online platform.