Incentive Schemes for Attended Home Delivery Services

• Published in: Transportation science Vol. 40; no. 3; pp. 327 - 341
• Main Authors: Campbell, Ann Melissa, Savelsbergh, Martin
• Format: Journal Article
• Language: English
• Published: Linthicum, MD INFORMS 01.08.2006; Transportation Science & Logistic Society of the Institute for Operations Research and Management Sciences; Institute for Operations Research and the Management Sciences
• Subjects: Analysis; Applied sciences; Business orders; Consumer behavior; Cost control; Cost incentives; Cost reduction; Customer services; Customers; Delivery costs; Delivery services; Exact sciences and technology; Grocery stores; Ground, air and sea transportation, marine construction; Heuristics; Home delivery of goods; Home delivery services; Incentives; Linear programming; Logistics; Marketing; Mathematical models; Modeling; Motivation; Optimization; Postal & delivery services; Profitability; Profits; Route optimization; Simulation; Studies; Transport; Transport economics; Transportation; Transportation planning, management and economics; vehicle routing; Vehicles; Vendors; United States; Incentive; Delivery (good); Consumer behavior; Vehicle routing problem; Transportation; home delivery services; vehicle routing; Modeling; Cost lowering; Optimization; Logistics
• ISSN: 0041-1655; 1526-5447
• DOI: 10.1287/trsc.1050.0136

Many companies with consumer direct service models, especially grocery delivery services, have found that home delivery poses an enormous logistical challenge because of the unpredictability of demand coupled with strict delivery windows and low profit margin products. In this paper, we examine the use of incentives to influence consumer behavior to reduce delivery costs. We propose optimization models for two forms of incentives and demonstrate their value and impact through simulation studies. We conclude with a presentation of insights resulting from our efforts.