On the Unique Features and Benefits of On-Demand Distribution Models

To close the gap between current distribution operations and today’s customer expectations, firms need to think differently about how resources are acquired, managed and allocated to fulfill customer requests. Rather than optimize planned resource capacity acquired through ownership or longterm partnerships, this work focuses on a specific supply-side innovation – on-demand distribution platforms. On-demand distribution systems move, store, and fulfill goods by matching autonomous suppliers' resources (warehouse space, fulfillment capacity, truck space, delivery services) to requests on-demand. On-demand warehousing systems can provide resource elasticity by allowing capacity decisions to be made at a finer granularity (at the pallet-level) and commitment (monthly versus yearly), than construct or lease options. However, such systems are inherently more complex than traditional systems, as well as have varying costs and operational structures (e.g., higher variable costs, but little or no fixed costs). New decisionsupporting models are needed to capture these trade-offs. Keywords—platform; logistics; sharing economy; facility location.