Integrated optimization of order splitting and distribution routing for the front warehouse mode e-retailing

Abstract

Along with the rapid growth of online purchasing, more and more e-retailers tend to adopt the front warehouse mode to improve the performance of customer service by locating multiple front warehouses with limited space and storage capacity closer to consumers. In this context, order splitting and distribution become increasingly crucial decisions that might impact the efficiency of order fulfillment. These two issues are investigated in the related works commonly as two independent problems, although they are inherently coupled with each other. This study established an integrated optimization model for order splitting and distribution routing for the front warehouse mode e-retailing. The model considers practical features, including order splitting constraints based on product type and quantity, finite inventory, heterogeneous vehicle routing constraints, and time windows. A branch-price-and-cut algorithm is proposed to solve the problem. Two logic-based Benders cuts are designed to deal with the infeasible distribution routes. The efficiency of the proposed algorithm is verified in an experimental study by considering CPLEX and two heuristic algorithms as benchmark methods. The dominance of our proposed algorithm is observed, especially for large-scale cases. The impacts of overlapping inventory levels, the combination of heterogeneous vehicles, and the width of time windows are also examined.