Making opportunity sales in attended home delivery

Abstract

Research on time window management in attended home delivery mainly focuses on influencing customers' delivery time choices to reduce monetary and environmental costs. In this study, we adopt a different perspective and propose exploiting otherwise idle time and vehicle capacities to generate extra profits through opportunity sales for e-groceries. We consider nudging potential target customers (residing in locations that are "easy" to insert into the delivery tours) with push notifications to generate new sales. These customers are incentivized for purchases by dropping the terms imposed on standard e-grocery sales such as service fees or minimum purchase quantities. Managing the delivery operations for this innovative business model requires concurrently choosing the target customers and planning the vehicle routes under the offer acceptance and response time uncertainties. To solve this challenging problem, we propose an integer linear programming model that enables a decomposition of the problem into a routing problem and several customer selection problems. For the solution to the customer selection problems, we propose mathematical models with varying risk-taking levels. We also investigate the benefits of dynamic policies to take advantage of the information revealed during the delivery operations in order to adjust customer selection and vehicle routing decisions. Our extensive numerical experiments show that these models, equipped with dynamic decision making, can compete with the risk-ignorant models for the total profit while generating more sales per offer, as well as ensuring timely execution of the delivery operations.