Sustainable e-grocery home delivery: An optimization model considering on-demand vehicles

Abstract

The e-grocery sector has experienced a significant boost since the COVID-19 pandemic dramatically changing consumer buying behaviours. As demand for faster and more efficient delivery options grows e-grocery retailers face increasing pressure to optimize home delivery operations. Collaborations with third-party logistics providers (3PLs) although still overlooked have emerged as promising offering operational flexibility and environmental benefits. This work introduces an optimization model that supports the design of an on-demand delivery fleet conjunctly with delivery routings and schedules while considering both cost and environmental impact. To this aim a vehicle routing problem with time windows (VRPTW) is extended to incorporate on-demand fleet design and three different objective functions embodying a cost-efficient an environmentally-effective and a costenvironmental balanced perspective respectively. Numerical experiments based on an Italian case study show that prioritizing environmental objectives reduces emissions by over 90% with marginal increases in annual costs. Besides on-demand vehicles enable flexibility that facilitates the adoption of sustainable delivery options without requiring challenging investments such as delivery fleet. Several contributions are provided: insights into using on-demand vehicles are proposed, a mathematical model jointly optimizing fleet design and delivery routing and scheduling while considering both costs and environmental objectives is developed and its practical application is demonstrated using real-world data. The findings highlight the significant impact of environmental considerations on fleet composition and operational efficiency offering actionable strategies for e-retailers to reduce emissions while maintaining service quality.