Heuristics for inventory and delivery management of online-retailer

Abstract

In this study, we develop heuristic decision rules for inventory replenishment and delivery plan for an online-retailer. When a customer places an order of different SKUs on an online-retailer’ website, the online-retailer, in real time, assigns available inventory on-hand at its warehouse to the order. In this procedure there may be possible to reduce total cost by re-assigning inventory. We determine the timing and sizing of replenishment, and delivery timing for each orders to minimize total cost occurred. Expected delivery date (Due date) of an order containing different SKUs is determined by the latest due date among items in the order. Also the customer can cancel the orders. Retailer replenishes stocks from a vendor for each item with limited capacity. We show that the developed heuristic algorithms reduce total cost by evaluation of performance among algorithms with simulation.