Digital technology advancement has been changing grocery retailing customers’ behavior and expectations. Enabled by digital technologies and pleased by the digital disruptors, customers are expecting convenient online shopping and fast delivery. To retain their loyalty, retailers are forced to provide better services through digital transformation.
An MIT study focuses on one of Walmart’s initiative – the launch of Walmart’s online grocery platform. The researchers propose a framework to help build up the logistics platform that allows horizontal collaboration. The framework includes such steps as identifying a partner, calculating the cost benefits, creating. The partner selection and simulation are performed by a model developed by the team which provides the basis to solicit the partners to collaborate on the platform.
The model is used to calculate the delivery costs (pre-collaboration) from two locations (source and destination). The model will also calculate the delivery costs (post collaboration) across multiple destinations using VRP algorithm. Based on the sensitivity analysis results generated via simulation, we prove that order density, delivery time window, and the driver engagement are the major factors that influence delivery lead time, delivery costs and SLA.
Selecting the correct delivery areas and having the right partners will help the platform build density and order volume. This will create a reinforcing loop where more orders will generate increased demand for drivers and effectively drive down the delivery cost, thus enhancing the competitiveness of the platform.