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Benefits of Reevaluating Real-Time Order Fulfillment Decisions

Author

Listed:
  • Ping Josephine Xu

    () (Amazon.com, Seattle, Washington 98104)

  • Russell Allgor

    () (Amazon.com, Seattle, Washington 98104)

  • Stephen C. Graves

    () (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract

When a customer orders online, an online retailer assigns the order to one or more of its warehouses and/or drop-shippers to minimize procurement and transportation costs based on the available current information. However, this assignment is necessarily myopic because it cannot account for any subsequent customer orders or future inventory replenishment. We examine the benefits of periodically reevaluating these real-time assignments. We construct near-optimal heuristics for the reassignment for a large set of customer orders to minimize the total number of shipments. Finally, we present evidence of significant saving opportunities by testing the heuristics on order data from a major online retailer.

Suggested Citation

  • Ping Josephine Xu & Russell Allgor & Stephen C. Graves, 2009. "Benefits of Reevaluating Real-Time Order Fulfillment Decisions," Manufacturing & Service Operations Management, INFORMS, vol. 11(2), pages 340-355, January.
  • Handle: RePEc:inm:ormsom:v:11:y:2009:i:2:p:340-355
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    File URL: http://dx.doi.org/10.1287/msom.1080.0222
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    References listed on IDEAS

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    1. Jayashankar M. Swaminathan & Sridhar R. Tayur, 2003. "Models for Supply Chains in E-Business," Management Science, INFORMS, vol. 49(10), pages 1387-1406, October.
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    Cited by:

    1. repec:eee:transb:v:107:y:2018:i:c:p:212-228 is not listed on IDEAS
    2. Mak, Ho-Yin & Shen, Zuo-Jun Max, 2016. "Integrated Modeling for Location Analysis," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 9(1-2), pages 1-152, October.
    3. Kishore Bhoopalam, A. & Agatz, N.A.H. & Zuidwijk, R.A., 2017. "Planning of Truck Platoons: a Literature Review and Directions for Future Research," ERIM Report Series Research in Management ERS-2017-010-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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