The Benefits of Re-Evaluating Real-Time Order Fulfillment Decisions

When a customer orders online, an online retailer assigns the order to one or more of its warehouses and/or drop-shippers, so as to minimize procurement and transportation costs, based on the available current information. However, this assignment is necessarily myopic as it cannot account for any subsequent customer orders or future inventory replenishment. We examine the benefits of periodically re-evaluating these real-time assignments. We construct near-optimal heuristics for the re-assignment for a large set of customer orders to minimize the total number of shipments. Finally, we present evidence of significant saving opportunities by testing the heuristics on order data from a major online retailer.

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