Improved Speed via Regional Fulfillment
For e-retail operations, this provides a theoretical foundation for a counterintuitive strategy to improve customer satisfaction.
The paper explains why regionalizing a fulfillment network can improve speed, using an equilibrium model to quantify delay reduction and providing algorithms for low-delay assignments.
In e-retail, order fulfillment speed has become one of the most important metrics affecting customer satisfaction. While common wisdom dictates that maintaining a large global fulfillment network maximizes efficiency via economies of scale, recent evidence has shown that breaking up the network into smaller regions can yield significant speed improvements. In this paper, we consider a simple abstract model of order fulfillment by which we explain this phenomenon. We characterize fulfillment assignments satisfying an equilibrium condition based on the greedy fulfillment strategy, and quantify how the resulting fulfillment delay can be decreased by regionalizing the network. Finally, we provide some algorithmic results for computing low delay assignments, and some simulations supporting our equilibrium framework.