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Joint Optimization on Order Splitting and Order Consolidation for Online Supermarket Retailing

In this paper, we concentrate on solving a joint optimization problem on order splitting and order consolidation arising on online supermarkets retailing. We firstly identify some unique features of online supermarkets order fulfilment decision such as multi-item orders, multi-warehouse layout network, multiple shipments, and capture these features by using a multicommodity network flow structure. Then, we formulate this problem as a mix-integer programming model that integrates order splitting and order consolidation decisions with the objective of minimizing the number of order splitting, lateral transshipment cost and packaging cost, and propose an improved Benders decomposition algorithm (IBDA) to solve the proposed model. Next, we derive some properties of the proposed model, and provide order splitting and consolidation rules. Finally, we carry out numerical experiments to verify the effectiveness and efficiency of the proposed model and solution algorithm, and report numerical results as well as management insights.