Internet shopping is taking an increasing share of the retail market,

putting pressure on retailers to slash delivery times and to get products

to customers quickly. This reduces operational efficiency and

increases transportation costs for retailers with dedicated fleets of

delivery vans. Using crowdsourced deliveries by ad-hoc external parties

could offer a cost-effective solution

Arslan, A.M. (Alp)

Erasmus University Digital Repository

ROTTERDAM SCHOOL OF MANAGEMENT, ERASMUS UNIVERSITY Making diversity  policies workBy Meir Shemla CEO extraversion  and M&A behaviourChris Murray talks with Taco Reus How to regulate  international banksBy Wolf Wagner    Streamlining deliveries through crowdsourcingBy Alp Arslan Can neuroforecasting  predict market behaviour?By Alexander Genevsky  Do apologies and favours make for happy consumers?By Laura Straeter 4th Quarter 2017Management Knowledge         RSM DISCOVERYRSM - a force for positive changewww.rsm.nl/discovery 14   |  4th Quarter 2017Management KnowledgeRSM DISCOVERYStreamlining deliveries through crowdsourcingBy Alp Arslanting customers rate the service. The alternative to this is to vet drivers in advance, by verifying their licence, in-surance and registration, or by doing background checks.Crowdsourcing schemes already ex-ist. Walmart recently began testing a scheme whereby it asks its in-store cus-tomers to drop off packages on their way home if it only added a few min-utes to their travel time and was not an inconvenience. DHL also ran a pilot scheme in Stockholm called “MyWays” using local people to perform deliver-ies; and Amazon operates a similar ser-vice in Seattle called Amazon Flex.Modelling the benefitsCrowdsourcing certainly works in theo-ry, but we wanted to test the best ways to implement it in the real world. We wanted to find out what the most-effi-cient way is to send a parcel from A to B, making deliveries faster and cheap-er. This meant converting the theory into an algorithm to create a virtual environment in which we could mod-el various scenarios.The prospect of using mobile technol-ogy and crowdsourcing to reduce de-livery lead-times is an exciting new way of dealing with this. The concept uses excess capacity on journeys that will take place anyway, to make deliveries of small packages, thus negating the need for an additional journey. In a re-cent paper, my colleagues Niels Agatz, Leo Kroon, Rob Zuidwijk and I inves-tigated how much this could benefit retailers in practice.Peer-to-peerRecent years have seen the advent of peer-to-peer (P2P) platforms for trans-portation. Some focus on long-distance shipping; others on on-demand local deliveries. But one thing they have in common is that they all offer online solutions and mobile smartphone apps that connect delivery tasks (par-cels that require shipping) with drivers willing to make a drop-off on a jour-ney they were going to make anyway, in return for a small fee. Drivers pick up packages from a retail store, ware-house or dedicated pickup location, and deliver them to customers located along their route.Instead of being dedicated delivery drivers, these drivers work on an ad-hoc basis on their own initiative. They might also be willing to make deliveries simply to help others, and to support environmental improvements, and not just to earn some extra money. After all, they may also be helping to reduce vehicle emissions, and easing conges-tion by removing the need for an ad-ditional dedicated delivery vehicle. It also fits the current trend towards the “sharing economy”.To ensure that all parcels are de-livered in time, P2P delivery plat-forms can use a third-party service as backup when no ad-hoc driver can be found. And to ensure the reliability and trustworthiness of drivers, it might also use a feedback mechanism, let-Internet shopping is taking an increasing share of the retail market, putting pressure on retailers to slash delivery times and to get prod-ucts to customers quickly. This reduces operational efficiency and increases transportation costs for retailers with dedicated fleets of delivery vans. Using crowdsourced deliveries by ad-hoc external par-ties could offer a cost-effective solution.“The results suggest that using ad-hoc drivers can make the delivery much more cost-efficient, and can reduce system-wide vehicle miles, significantly reducing transportation costs.”4th Quarter 2017   |   15of matching tasks to drivers each time a new task or driver arrived.Impressive savingsTo quantify the benefits, we compared the performance of a crowdsourced system with a traditional dedicated delivery set-up. The results suggest that using ad-hoc drivers can make the delivery much more cost-efficient, and can reduce system-wide vehicle miles, significantly reducing transpor-tation costs.Using a combination of both crowd-sourced delivery and a dedicated fleet is the most effective and practical solu-tion. It could generate potential travel cost savings of 18 to 37 per cent when compared to using a purely dedicated fleet. The highest level of savings comes when drivers do not have to make de-tours to accommodate a pickup. The with regard to how much time they are willing to spend and how flexible they are about making detours. Some may only want to make a small deviation to take a parcel on a trip that they were already making, while others may be willing to make multiple stops.If a driver is matched with only one task, there is only one route – the origin of the driver and then the par-cel, followed by the destination of the parcel and then the driver. If there are multiple pickups and drop-offs on a single trip, things get more compli-cated. There will be several feasible routes, and you need to figure out which is the optimal route sequence.Since delivery tasks and available drivers arrive dynamically throughout the day, we also factored in an event-based rolling horizon framework, which repeatedly solved the problem The solution we applied is a vari-ant of the classic pickup and delivery problem (PDP) that aims to transport goods from an origin to a destination at minimum cost. Unlike the tradition-al model, however, we only used our dedicated vehicle fleet as a back-up option, to make deliveries that can-not be made by ad-hoc drivers, or if none were available. This is similar to ridesharing or carpooling, whereby individual travellers share journeys to save on costs. There does still need be a dedicated fleet of backup vehicles, however. And therefore you also need to know how to use this in the most efficient way.A crowdsourcing provider needs to assign parcel delivery tasks to drivers and to determine the best associated delivery routes. One problem is, how-ever, that ad-hoc drivers vary greatly www.rsm.nl/discovery 16   |   4th Quarter 2017Management KnowledgeRSM DISCOVERYThis article draws its inspiration from the paper Crowdsourced Delivery: A Dynamic Pickup and Delivery Problem with Ad-hoc drivers written by Alp M. Arslan, Niels Agatz, Leo Kroon and Rob Zuidwijk (5 September 2016). ERIM Report Series Research in Management. DOI: http://dx.doi.org/10.2139/ssrn.2726731Alp Arslan  is  a PhD Candidate, Department of  Technology and Operations Management, Rotterdam School of Management, Erasmus University.  EMAIL   arslan@rsm.nlbest way to do this is to tap into the unused capacity in existing traffic flows.Our results also proved that time flexibility and stop willingness on the part of the drivers has a strong im-pact on performance, with increasing flexibility improving cost efficiency. Moreover, you also need fewer driv-ers to do the same amount of work if each individual driver makes more stops, or if you combine several deliv-ery tasks. And by using crowdsourced drivers in addition to their dedicated fleet means managers can also make extra savings by decreasing the size of the fleet, by as much as 18 per cent on average, we calculate.One important thing that our results showed, however, is that you cannot always trust the availability of crowd-sourced delivery as a stand-alone solu-tion. Therefore, you will probably always need some form of dedicated vehicles in your resource pool, as cover in case no crowdsourced option is available.Nevertheless, in the best-case sce-nario, a manager could save up to 20 per cent in costs. This offers flexibil-ity as it would release budget and re-sources that could be spent on exter-nal costs such as accident insurance and incentives.Future tasksOur research only considered deliv-ery costs, under the assumption that dedicated vehicles and ad-hoc drivers incur the same amount of unit cost. In future we plan to study other aspects, such as identifying the correct financial incentives to attract a sufficient crowd, and how you can minimise system- wide costs.One thing we are now looking at is using only one driver on specific routes. If you allow the drivers to trans-fer parcels between themselves, you can create a web or a network of in-dividual driver routes (like a relay sys-tem between nodes), so that no one has to extend their individual jour-neys, but the parcel still gets delivered as quickly as possible via the shortest distance possible.To increase the efficiency on the crowdsourced side, you also need to keep the delivery drivers happy at all times, otherwise they may be less willing to work for you. Prioritising is therefore key. But we believe that if managers do this, it may even become possible one day to dispense entirely with the need for a dedicated delivery fleet. And that would take cost savings to another level. “Our results also proved that time flexibility and stop willingness on the part of the drivers has a strong impact on performance…” RSM ExpertiseSpecialising in the disciplines of supply chain management, busi-ness information management, and innovation management, the Department of Technology & Operations Management deals with the effective management of how to develop, produce and de-liver products and services.  The department’s world-class scholars develop scientific knowl-edge and train students to become reflective practitioners who can suc-cessfully manage and design sup-ply chains, information systems and innovation processes. In doing so, the department combines scientif-ic ambition and rigour with practi-cal relevance, both in research and in teaching. WEB   www.rsm.nl/tom

Streamlining deliveries through crowdsourcing

https://repub.eur.nl/pub/104087/p14-16-Arslan-Deliveries.pdf

Streamlining deliveries through crowdsourcing

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