Work

Fleet sizing with price-sensitive customers in Attended Home Delivery

Year: 2025

Type: article

Abstract: Retailers offering Attended Home Delivery (AHD) struggle with thin profit margins due to high delivery costs and constrained routing flexibility. AHD requires retailers and customers to agree on specific time windows, limiting operational efficiency and increasing fleet requirements, particularly when customer preferences tend to cluster around peak times. While retailers have some ability to influence customer choices through pricing and availability strategies, failing to account for fleet costs and delivery constraints can lead to inefficient operations and reduced profitability. This study introduces an integrated approach to fleet sizing and time-window pricing for price-sensitive customers. We propose a Mixed Integer Programming (MIP) model that maximizes profit by balancing revenue and delivery costs, leveraging a nonparametric rank-based choice model to capture customer behavior while explicitly considering routing constraints and fleet ownership expenses over multiple periods. Using computational experiments on small-sized instances inspired by real-world data, we evaluate the impact of explicitly modeling routing costs, compare different pricing strategies, examine the effects of multi-period fleet planning, and assess sensitivity to varying customer and cost conditions. Results show that explicitly modeling routing constraints reduces profit loss by 29% compared to traditional cost approximations but increases computational complexity. To address this, we develop a Fix & Optimize (F&O) matheuristic approximate solution method that enables the application of our model to larger instances. Our findings emphasize the need for retailers to integrate demand management and fleet planning to optimize operational profitability.

Source: Transportation Research Part E Logistics and Transportation Review

DOI: 10.1016/j.tre.2025.104388

Authors: Daniela Fernandes, Fábio Neves-Moreira, Pedro Amorim

Institutions: Universidade do Porto, INESC TEC

Language: English

Topic: Urban and Freight Transport Logistics

Subfield: Building and Construction

Field: Engineering

Domain: Physical Sciences

Open Access status: hybrid

Estimated APC paid: $4,240

Funders: Horizon 2020 Framework Programme, Fundação para a Ciência e a Tecnologia