An algorithm for solving the multi-period online fulfillment assignment problem |
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Authors: | Stephen Mahar Kurt M Bretthauer MA Venkataramanan |
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Institution: | aDepartment of Information Systems and Operations Management, Cameron School of Business, University of North Carolina Wilmington, Wilmington, NC 28403, United States;bDepartment of Operations and Decision Technologies, Kelley School of Business, Indiana University, Bloomington, IN 47405, United States |
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Abstract: | This paper develops an optimal solution procedure for the multi-period online fulfillment assignment problem to determine how many and which of a retailer/e-tailer’s capacitated regional warehouse locations should be set up to handle online sales over a finite planning horizon. To reduce the number of candidate solutions in each period, dominance rules from the facility location literature are extended to handle the nonlinear holding and backorder cost implications of our problem. Computational results indicate that multi-period considerations can play a major role in determining the optimal set of online fulfillment locations. In 92% of our test problems, the multi-period solution incorporated fewer openings and closings than myopic single period solutions. To illustrate the use of the model under changing demands, the multi-period solution yielded different supply chain configurations than the myopic single period solution in over 37% of the periods. |
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Keywords: | Supply chain management Multi-period Facility location Dual sales channel |
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