[ESSEC Knowledge] by Claudia Archetti - Professor in Operations Research. She is member of the Operations Management & Operations Research (OMOR) Research Cluster.

The explosion of information technology services is deeply shaping the economy and the business world by generating new industries and fields of production and service that were not even conceivable thirty years ago. In particular, e-commerce has revolutionized customer behavior and needs and, consequently, the way companies do business.

Figure 1. The explosion of e-commerce.

Focusing on the logistics implications of e-commerce, the rapid increase of the speed of delivery has generated enormous challenges in the organization of the distribution of on-line orders. In particular, last-mile delivery is the most challenging part of the distribution process, counting as the highest cost component (https://www.mckinsey.com/, Travel, Transport and Logistics, September 2016 [3]). Last-mile delivery corresponds to the last leg in the distribution process, whereby the consignment is delivered from the last distribution point, either a warehouse or a distribution center, to the recipient, either at the recipient's home or at a collection point. The main activities performed in last-mile deliveries are related to warehouse management and the transportation of goods to the recipient. In detail, warehouse management includes picking operations as well as inventory management, performed in a setting previously defined by strategic and tactical decisions (e.g., warehouse design, product allocation). Organizing the transportation, instead, implies defining the daily operations related to the distribution. A great example of the challenges related to managing distribution activities for on-line shoppers is provided by Amazon fulfillment centers. 

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