Demand in e-groceries is increasing. In practice, a wide range of business models exists. This post focuses on store-based home deliveries and a quite simple question: Which products should I ship to my customers?
As a simple example, imagine you are going shopping to your favourite grocery store to buy some raspberries. If you are not in a hurry, you will most likely inspect the available items on shelf and take the ones which fit your needs the best. In e-groceries, the customers does not have this option. Instead, the e-grocer or logistics provider needs to decide which items to pick for each incoming order. This leads to interesting trade-offs for the provider. Potential options are:
- First-expired, first-out (FEFO): The provider ships the items with the shortest remaining shelf life first. This reduces food waste as fresh items can be kept for later shipments. Customers, however, might be unhappy as they may receive products with a lower quality than expected.
- Last-expired, first-out (LEFO): The provider ships the items with the longest remaining shelf life first. In most cases, the customer will be happy with the decision, however, over time a lot of food waste will accumulate as not all items can be sold on time.
- Random: The provider ships items independent of the remaining shelf life. It is the easiest policy to implement and one does not have to think about it in more detail. Unfortunately, it also means that one completely loses control over inventory processes and most likely still generates high amounts of food waste.
We investigated these trade-offs by either focusing on food waste or customer perspectives in two recent works. To collect customer preferences, a survey of over 400 customers in Vienna, Austria, was conducted. Results show that customers value fresh products, however, it is not linearly increasing as often assumed in various related work. While it makes a big difference if your berries have a remaining shelf life of 1 or 2 days, it matters less if it is 3 or 4 days. Additionally, preferences concerning delivery day, times and fees were collected. These findings were implemented in a model-driven decision support system, which assists one in the design of e-grocery service offers.
If a reduction in food waste is of focus, a different approach is required. More specifically, one needs to quantify the impact of the aforementioned strategies: FEFO, LEFO, and a random selection. Results of a computational study show that the trade-off is significant. Depending on the decision-maker’s objective and the selected picking strategy, travel distances, delivered food quality and accumulated food waste vary substantially. Additional important impact factors are the number of delivery vehicles, respective storage temperatures and the logistics network.
The decision of which specific food items one should ship to each customer is consequently of vital importance. It reduces food waste, increases customer satisfication and further opens up new business opportunities. For instance, it allows one to guarantee a certain remaining shelf life for food products ordered online, and, potentially, even to create multiple service offers depending on customers’ needs. If done well, customers are happier, costs are lowered and food waste is reduced. Food for thought?
– Fikar, C (2018) A decision support system to investigate food losses in e-grocery deliveries. Computers and Industrial Engineering, 117, 282-290. DOI: https://doi.org/10.1016/j.cie.2018.02.014
– Fikar, C, Mild, A, Waitz, M (2019) Facilitating consumer preferences and product shelf life data in the design of e-grocery deliveries. European Journal of Operational Research, in press. DOI: https://doi.org/10.1016/j.ejor.2019.09.039