A Frame Work and Analysis to Inform the Selection of Piece-level Order-fulfillment Technologies

The piece-level order-fulfillment technology selection problem is an important strategic problem that significantly impacts distribution center costs and operations, and is typically solved based on empirical experiences. Given a demand curve and a suite of available piece-level order-fulfillment technologies, we analyze where in the demand curve different order-fulfillment technologies should be applied. To do so, we develop a framework that jointly determines the best combination of piece-level order-fulfillment technologies and the assignment of SKUs to these technologies, which relaxes the sequential-modeling approach of previous research. We validate our methodology with industry data and show that our model provides technology recommendations and SKU assignments that are consistent with successful implementations. Through a set of numerical experiments and statistical analysis, we identify key factors in implementing manual versus automated order-fulfillment technologies and provide observations into the application of different order-fulfillment technology strategies. Finally, we present conclusions and future research directions.