Integrated last-mile network design for parcel delivery considering failed delivery services

Abstract

Successful parcel deliveries are crucial for customer satisfaction and cost reduction in fuel and labor expenses due to repeated redelivery attempts. Unsuccessful delivery attempts often stem from customer unavailability, incorrect addresses, inaccessible locations, or driver non-compliance, such as leaving a notification card without making a delivery attempt.

This thesis introduces an integrated modeling framework for the design of last-mile networks for parcel delivery companies. We investigate four types of failed delivery services: (a) carding, (b) redirection to a new address, (c) same-day evening redelivery, and (d) next-day redelivery. These services vary in total travel distance and service time, thereby affecting the last-mile delivery costs. Our framework consists of a two-echelon location-routing optimization model, which includes a failed delivery demand model and a routing cost estimation model. This integrated model aims to optimize the last-mile parcel delivery network by determining (i) the optimal number and locations of facilities, (ii) the allocation of service areas, (iii) the composition of the delivery fleet, and (iv) the fleet governance scheme for each service area (in-house vs. outsourced operations).

To validate the models, we conduct a large-scale case study in Sydney, Australia, where daily deliveries exceed 90,000 parcels. We assess the implications of failed delivery services as policy offerings and value-added services. We underscore their substantial impact on delivery costs and competitive potential. We conduct a detailed analysis of the differences in failed delivery rates between in-house and subcontractor drivers, revealing opportunities for cost savings through contract renegotiation, particularly in areas with high demand density. Finally, we advocate a transition to a fully electric last-mile delivery fleet, driven by its cost-effectiveness and positive environmental effects.