Sachin Modi accepted for publication in International Journal of Production Research
Mike Ilitch School of Business Professor of Global Supply Chain Management Sachin Modi has had an article accepted for publication in the International Journal of Production Research, which publishes research on manufacturing and production engineering, logistics, production economics and production strategy.
The article, “Appreciating How Your Bread is Buttered: Improving Online Order Allocation for Cross-Channel Retailers,” was co-authored by Steve Mahar (Villanova University) and Peter Salzarulo (Miami University).
Abstract
Existing research has considered how pure online retailers can optimize the allocation of fulfillment responsibilities for online sales. However, the fulfillment policies used by pure online retailers may be suboptimal for their dual-channel counterparts. This paper considers online order allocation policies for cross-channel retail/e-tail organizations which utilize buy online, ship from store (BOSS) fulfillment. Specifically, we develop and evaluate a policy for allocating fulfillment responsibilities for a set of multiproduct online orders across a retailer’s store locations when the retailer also faces in-store demand for the same products. Further, our model incorporates carrier rate schedules into the allocation decision and adjusts allocations based on current and forecasted inventory positions at the stores. As such, the model determines fulfillment responsibilities by balancing quantity discounted carrier shipment costs, fixed costs of handling/packing orders, and expected inventory positions. Computational results highlight the extent to which our policy outperforms (1) single-channel policies without in-store inventory considerations and (2) a baseline policy that allocates online orders to minimize the total number of shipments. We find that undertaking BOSS without tailoring online order allocation to the cross-channel setting accommodates online fulfillment at the expense of in-store performance. Conversely, consideration of in-store inventories in the order allocation decision enables a cross-channel retailer utilizing BOSS to simultaneously improve service levels and reduce inventory. Under our policy not only do shortages decrease for walk-in customers but also this higher level of service is achieved with less inventory.
