Integration of order picking and vehicle routing in a B2C e-commerce context

E-commerce sales are increasing every year and customers who buy goods on the Internet have high service level expectations. In order to meet these expectations, a company's logistics operations need to be performed carefully. Optimizing only internal warehouse processes will often lead to suboptimal solutions. The interrelationship between the order picking process and the delivery process should not be ignored. Therefore, in this study, an order picking problem and a vehicle routing problem with time windows and release dates are solved simultaneously using a single optimization framework. To the best of our knowledge, it is the first time that an order picking problem and a vehicle routing problem are integrated. A mixed integer linear programming formulation for this integrated order picking-vehicle routing problem (OP-VRP) is provided. The integrated OP-VRP is solved for small instances and the results are compared to these of an uncoordinated approach. Computational experiments show that integration can lead to cost savings of 14% on average. Furthermore, higher service levels can be offered by allowing customers to request their orders later and still get delivered within the same time windows.