The value of integrating order picking and vehicle routing decisions in a B2C e-commerce environment

Abstract

In B2C e-commerce sales, customers expect a fast and low-cost delivery. To be able to fulfil these customer expectations, both warehouse and distribution operations have to be performed in an efficient and effective way. Ideally, these two supply chain functions should be considered simultaneously in an integrated problem since they are interrelated. In this paper, a record-to-record travel algorithm is proposed to solve the integrated order picking-vehicle routing problem (I-OP-VRP). Experiments with both small-size and large-size instances are conducted. Furthermore, the integrated approach is compared with an approach in which both problems are solved sequentially. Results show that integration leads to increased service levels, i.e. it allows to shorten the time between placing an order and receiving the goods. On top, the integrated approach leads to costs savings of on average 1.8%. Thus, integration is indispensable for a fast and cost-efficient delivery of goods.