Capacitated Vehicle Routing Problem with Delivery Options: Private or Shared Location

Abstract

Last-mile delivery costs are increasingly growing due to the rapid growth in E-commerce and the proliferation of online shopping especially after COVID-19 crisis. Integrating shared location delivery systems with home delivery has been a new trend in tackling last mile delivery challenges. This paper studies the Capacitated Vehicle Routing Problem with Delivery Options (CVRPDO). In this problem, customers can choose between picking up their requests from a shared location or receiving them at their homes within a preferred time window. The problem is formulated mathematically to minimize the total delivery costs considering the customers’ preferences. Results include comparisons between delivery costs in the standard Capacitated Vehicle Routing Problem (CVRP) and those in the CVRPDO. Results demonstrate that the CVRPDO outperforms the CVRP by a considerable margin for varied-size instances providing a justification for substantial investment in establishing shared locations for delivery.