Modeling and analysis of order fulfillment decisions in retail

Abstract

"Today, retailing emphasis has shifted from transaction-orientation to consumer-orientation, where retailers are focusing to enhance the customers’ shopping experience. Retailers are redesigning their order fulfillment processes to meet customer expectations such as low prices and responsiveness. Further, brick-and-mortar retailers are expanding their sales channels and also seamlessly integrating their channels to capture different customer segments, also known as omnichannel retailers. In the first essay, we study the omnichannel fulfillment strategy adopted by retailers in a duopoly market, competing on the price of the product. We develop a two-stage game theoretic model played sequentially: investment game and retail game. The retailers announce their fulfillment strategy in the investment game and determine the optimal price and inventory while competing on the product’s price in the retail game. We introduce two novel constructs, namely, strategy adoption cost and information factor, where the former helps characterize retailers’ evolution in the investment game and the latter help simplify the retail game such that the equilibrium strategy can be easily determined. In the second essay, we model order fulfillment decisions made by quick-commerce retailers such that the orders are delivered within the promised due time. The major order fulfillment processes are order picking, batching for delivery, and last-mile delivery. We model the stochasticity of the order arrival and delivery center processes and propose an analytical model that integrates order picking, batching, and delivery processes. Then, we formulate a non-linear optimization model to determine the number of pickers, delivery batch size, and the number of delivery persons that minimize the expected order fulfillment cost, such that the due time targets are achieved. In the third essay, we analyze the performance of two order fulfillment business models used by quick-commerce retailers considering uncertainty in workforce availability. We study two order fulfillment models: 1) combined pick and delivery, where picking and delivery are performed by the same worker, and 2) split pick and delivery, where a separate pool of workers performs picking and delivery. We develop an integrated analytical framework and provide the approximate analytical expressions for various order fulfillment performance measures."