Package consolidation approach to the split-order fulfillment problem of online supermarkets

The split-order fulfillment problem has been a new key issue for online supermarkets. Multi-item orders to be fulfilled by multiple warehouses are split into several suborders and delivered with multiple shipments, increasing transportation cost. This paper presents a powerful order fulfillment method-package consolidation-in which two or more stock-keeping units (SKUs) in the suborders of one order will be packed into fewer packages through lateral transshipment. We propose a consolidation model and a packing model to determine which SKUs in suborders should be transshipped for package consolidation. In addition, we develop a modified first fit decreasing (FFD) algorithm to solve the packing model and a heuristic algorithm based on the breadth-first search strategy with cutting, long-sight and suborder rules to generate near optimal order fulfillment schemes in a reasonable time. The computation results verify the superiority of the package consolidation approach in solving split-order fulfillment problem. Moreover, our sensitivity analyses provide managerial insights for online supermarkets.