Incentive Schemes for Attended Home Delivery Services

Many companies with consumer direct service models, especially grocery delivery services, have found that home delivery poses an enormous logistical challenge due to the unpredictability of demand coupled with strict delivery windows and low profit margin products. In this paper, we examine the use of incentives to influence consumer behavior in order to reduce delivery costs. We propose optimization models for two forms of incentives and demonstrate their value and impact through simulation studies. We conclude with a presentation of insights resulting from our efforts. In recent years, many new and existing businesses have adopted a consumer direct (CD) service model that allows customers to purchase goods online and have them delivered directly to their front door. Crossing this “last mile” provides a huge increase in service for customers, but also creates a huge logistics problem