Order consolidation for the last-mile split delivery in online retailing

Abstract

This paper addresses the last-mile split delivery problem emerging in online retailing, in which multiple shipments are delivered to the same customer multiple times. We propose an innovative order consolidation approach which consolidates same customers’ shipments in the delivery station and delivers them in fewer trips. An integer programming model is formulated to make a cost tradeoff between splitting and consolidating shipments, which is solved by a new three-phase heuristic algorithm. Numerical experiments are conducted to demonstrate the superiority of the order consolidation approach over the First-In-First-Out approach on various parameters and generate managerial insights for applying it in practice.