Retail firms now offer same-day delivery via hybrid fleets that augment a privately owned delivery fleet with crowdsourced assets. As research on crowdsourced delivery continues to grow, it has implicitly assumed deliveries being conducted with an entirely crowdsourced fleet. In a new study by Catello et. al., researchers adopt a sociotechnical systems perspective to consider the phenomenon of combining privately owned delivery vehicles with crowdsourced assets into a hybrid fleet.
In this exploratory effort, the researchers examine how elements of the hybrid delivery system, namely, driver autonomy, compensation, fleet size, fleet mix, and demand intensity affect cost and service in last-mile delivery. Using a multimethod simulation combining agent-based and discrete event techniques with home delivery data from a major US retail pharmacy, they show how the emergent outcomes of this hybrid delivery system are a consequence of the constituent elements’ interdependence.
The experiments suggest a convex relationship between crowdsourced driver compensation and cost performance, such that low and high compensation amounts may actually increase unit delivery costs relative to a median compensation level, and a nonlinear negative relationship between compensation and fulfillment time. We find that these effects are moderated by fleet design (in terms of size and vehicle type mix) and order arrival rate intensity
This research also provides important insights into the nuance of managing crowdsourced last-mile delivery. Managers should move beyond just considering replacing their privately-owned fleets with a fully crowdsourced option and should also consider the use of a hybrid fleet. This research has shown that a hybrid fleet with both owned and crowdsourced vehicles can provide excellent service and responsiveness, while still finding low total cost solutions. However, this depends on finding the “right” compensation amount for drivers.
Paying too little means that capacity will be limited and paying too much is an inefficient use of resources; the decision of how much to compensate crowdsourced drivers is an important one that can have negative effects on total delivery costs and fulfillment times. As retailers continue to increasingly offer free home delivery, hybrid last-mile delivery fleets will become essential to providing an enhanced customer experience.
The experiments show that driver price sensitivity can influence the performance of the system, and therefore, managers need to look at the availability and price sensitivity (i.e., supply elasticity) of drivers in each of the markets where they use crowd-based resources. Similar to our results, they might find that there is a “sweet spot” where driver pay can provide the best trade-off between cost and service for their particular market, similar to the convex relationship discovered in this study.
The results in this study also convey the importance of monitoring arrival rates of orders for same-day delivery. When those rates become more intense, then firms can use crowdsourced delivery to handle additional demand faster than trying to increase the size of their privately-owned fleets. The findings also indicate that managers may be able to resize their vehicle fleet and mix to include vehicle capacity from the crowd.
Hybrid last mile delivery fleets with crowdsourcing: A systems view of managing the cost‐service trade‐off by VE Castillo, JE Bell, DA Mollenkopf, TP Stank – Journal of Business Logistics, 2021