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Integrated express shipment service network design with customer choice and endogenous delivery time restrictions

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  • Martin, Florian
  • Hemmelmayr, Vera C.
  • Wakolbinger, Tina

Abstract

Express parcel carriers offer a wide range of guaranteed delivery times in order to separate customers who value quick delivery from those that are less time but more price sensitive. To reflect the additional complexity this segmentation adds to the task of optimizing the logistics operations, we present a new model that accounts for the interplay between pricing of due times, customer decisions and the associated restrictions in the distribution process. This profit-maximizing express shipment service network design problem is solved by a heuristic solution approach that simultaneously determines the ideal set of offered delivery times, the associated pricing scheme and the load plan in order to maximize profit. High-quality solutions for realistically-sized instances are derived by a genetic-algorithm-based heuristic that exploits information of previously evaluated iterations. Using this new integrated approach, we provide insight on the potential benefit of an integrated model over sequential optimization of revenue and delivery cost. We also investigate the impact of tighter delivery due times on resource requirements and whether more granular service segmentation can be considered a profitable strategy in multimodal express parcel delivery networks.

Suggested Citation

  • Martin, Florian & Hemmelmayr, Vera C. & Wakolbinger, Tina, 2021. "Integrated express shipment service network design with customer choice and endogenous delivery time restrictions," European Journal of Operational Research, Elsevier, vol. 294(2), pages 590-603.
    • Handle: RePEc:eee:ejores:v:294:y:2021:i:2:p:590-603
    DOI: 10.1016/j.ejor.2021.02.014
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