DYNAMIC INCENTIVE MECHANISM FOR DELIVERY SLOT MANAGEMENT IN E-COMMERCE ATTENDED DELIVERY

VINSENSIUS ALBERT

Publication

DYNAMIC INCENTIVE MECHANISM FOR DELIVERY SLOT MANAGEMENT IN E-COMMERCE ATTENDED DELIVERY

VINSENSIUS ALBERT

Abstract

In attended home delivery, challenges arise in practice because of the short strict time windows, stochastic customer requests, and varying customers' preferences for delivery slots. In this thesis, we propose an integration of dynamic time slot incentives and order delivery with the intention of reducing overall delivery cost and improving profitability under a "next-day delivery" setting. The proposed incentive mechanism is shown to be able to exploit the variability in marginal fulfilment cost of an order and the customers' preferences to influence the customers' selection of delivery slots. The core of the methodology is an approximate dynamic programming formulation used to estimate the marginal fulfilment cost, accounting for operational vehicle routing cost and future orders. Finally, a novel multiple-slots selection paradigm is studied, where the proposed incentive mechanism allows merchants to effectively purchase delivery flexibility from customers to achieve a higher profit.