A machine learning optimization approach for last-mile delivery and third-party logistics

Abstract

Third-party logistics is now an essential component of efficient delivery systems, enabling companies to purchase carrier services instead of an expensive fleet of vehicles. However, carrier contracts have to be booked in advance without exact knowledge of what orders will be available for dispatch. The model describing this problem is the variable cost and size bin packing problem with stochastic items. Since it cannot be solved for realistic instances by means of exact solvers, in this paper, we present a new heuristic algorithm able to do so based on machine learning techniques. Several numerical experiments show that the proposed heuristics achieve good performance in a short computational time, thus enabling its real-world usage. Moreover, the comparison against a new and efficient version of progressive hedging proves that the proposed heuristic achieves better results. Finally, we present managerial insights for a case study on parcel delivery in Turin, Italy.