Roodbergen, Vis and Boter secure funding from Dinalog for a 1.1 million euro project

May 2010 – Researchers Kees Jan Roodbergen (project leader, Rotterdam School of Management), Iris F.A. Vis (VU University Amsterdam) and Jaap Boter (VU University Amsterdam and University of Amsterdam) have received funding from the Dutch Institute for Advanced Logistics (Dinalog) for their project entitled "Cross-chain order fulfillment coordination for internet sales". The total project size is 1.1 million euro. Participating companies are Neckermann.com, mYuice, Centraal Boekhuis, Scanyours.com and the non-profit public library organizations Sectorinstituut Openbare Bibliotheken and Vereniging Openbare Bibliotheken. The project was selected along with four other projects from a total of 21 submitted proposals.

Motivation of the project

The internet has completely changed the ways in which people communicate. Gradually, the internet is now also getting a firm grip on the physical goods flows. More and more consumers are ordering products via the web instead of buying them in a retail store. From a logistics point of view, this sales channel switch has an enormous impact. Deliveries to traditional brick-and-mortar stores can be made in relatively large quantities at regular intervals. Consumers then buy the product in the store and provide an important logistics service: they transport their own products to their own homes for free. With the internet, products are ordered in small quantities by individual consumers and the web store has to arrange for transporting the products to the consumers' home address. It is almost needless to say that this significantly increases logistics efforts in the supply chain.

From the consumers' perspective, there seems to be a desire to increase online ordering, provided that some circumstances are improved. An important limiting factor for consumers is the delivery process. In many web stores, the consumer has no influence on the timing of delivery. As a result more than 30% of all orders cannot be delivered at the first delivery attempt. Besides planning, there is also the issue of speed. Information gathering and ordering is so fast on the web, that even a delivery time of 24 hours may feel like a lifetime.

Objectives & goals of the project

In this project, new concepts, models and solution methods will be developed for a number of challenging innovations in the internet order fulfillment process. An important role will be played by the cross-chain control center (4C), which has a coordinating role, spanning across multiple supply chains. To better explain the 4C concept in the context of internet orders, consider the following example, which will also be researched in this project.

Currently, every web shop has its own "shopping cart", an electronic analogy of the supermarket shopping carts, to collect products from the web shop before proceeding to the checkout process. If a consumer wishes to buy products from three different web shops, (s)he will have to use three different electronic shopping carts, make three payments, and will have three separate home deliveries of the ordered products. An 4C that would offer one shopping cart that can be used to buy products at multiple web shops will make the ordering process much easier for the consumer. Implementation of such a concept is, however, far from straightforward, considering the potential consequences for information sharing, contract negotiations and software interfaces between all parties involved. Furthermore, the added value of the concept is only truly complete if all products from the electronic shopping cart are also delivered to the consumer's home in one single shipment at a time that suits the consumer.

More in general, the goals and objectives are as follows.

Research approach

In the path towards the goal, logistics tools will be developed to design 4C networks that efficiently coordinate and integrate fulfillment operations for delivery (and returns) of products from multiple web stores to individual consumers. Use will be made of techniques from the fields of Operations Management and Operations Research, creating new classes for known problems such as Facility Location, Vehicle Routing, and Reverse Logistics. Input from the marketing field, using consumer profiles and transaction data analysis, will be vital to enable a view on the impact of ordering behavior on the various design choices and vice versa.

Expected results

Consumers have adopted internet as a valuable sales channel. Four out of every five internet users in The Netherlands have performed an online purchase last year and about 700,000 new shoppers entered the online market in 2009. It is reasonable to expect a further significant growth of the online retail sales, which emphasizes the need for improved ways of handling the product flows efficiently and effectively.

The consortium contains universities as well as companies with extended experience in internet sales. This combination will ensure results that blend academic rigor and practical applicability. Consortium partners Neckermann.com and Centraal Boekhuis are already active as 4C and can bring new concepts from the project directly into action. The Dutch public libraries are in search for a new network design and coordination concept for book transports between library branches. The companies Scanyours.com, an eBusiness consultancy company, and mYuice, having its expertise in SAP implementations, can provide the gateway to a broader applicability of the concepts to new groups of consumers and companies.

K.J. Roodbergen

Dr. Kees Jan Roodbergen is an Associate Professor at Rotterdam School of Management, Erasmus University, The Netherlands. In his academic research, Roodbergen has a diverse interest, ranging from supply chain management, logistics of temperature-controlled (food) products, human factors in logistics, facility logistics, and traveling salesman problems. He has published in international journals such as Operations Research, IIE Transactions and the European Journal of Operational Research and has been a visiting researcher at the Georgia Institute of Technology. Roodbergen serves on the Scientific Advisory Council of the World Food Logistics Organization, an organization that represents 3500 companies specialized in handling cooled and frozen food products. Next to that he is a member of the College-Industry Council on Material Handling Education in the USA. This council is affiliated with the Material Handling Industry of America (800 companies) and facilitates the information interchange between industry and academia. His solution approaches have been successfully applied at a number of companies, and have been included in a SAP add-on. His teaching activities span the whole spectrum of Operations Management and Supply Chain Management at all levels, ranging from first-year Bachelor courses to post-experience programs.

I.F.A. Vis

Dr. Iris F.A. Vis is an Associate Professor of Logistics at the VU University Amsterdam. She holds an M.Sc. in Mathematics (specialization Operations Research) from the University of Leiden, and a Ph.D. from the Erasmus University Rotterdam. Iris Vis has been a Visiting Professor at the Virginia Polytechnic Institute and State University. Vis is a fellow of the research institute Tinbergen. The research interests of Vis are in the design and optimization of container terminals, vehicle routing, supply chain management and inventory management. The common goal in her projects is to develop new planning and control concepts to improve logistics operations by means of techniques from Operations Research. Empirical testing is performed in close relation with companies like Amsterdam Container Terminals and warehouses of DHL. Her articles have been published in or accepted by scientific journals as Operations Research, European Journal of Operational Research, IIE Transactions and Transportation Science. She received several awards for her scientific work, such as the INFORMS Transportation Science Section Dissertation Award 2002.

J. Boter

Prof. dr. Jaap Boter studied Musicology (MA) at Utrecht University. Having worked for a number of years as a consultant and lecturer of Arts Marketing at Utrecht University, he switched to the Marketing Department of the VU University Amsterdam in 2001 as assistant professor, to complete his PhD research into analyzing transaction data of cultural organizations, such as theater box office data, museum visiting behavior of Dutch Museum Card holders, and borrowing data of public library patrons. While GIS originally was simply included to map the customers in the data, his enthusiasm for the potential of GIS techniques grew rapidly and became an important foundation of his research. He set up a course on GeoMarketing for the M.Sc. Marketing program and is one of the founding partners of the Geomarketing Knowledge Center, in which the departments of Marketing, Logistics and Spatial Economics join several partners from industry to carry out research on the interface of customer service, distribution & warehousing, and spatial/geographical data. Next to his current work within the Marketing Department of the VU University Amsterdam, Jaap Boter also holds the Royal Booksellers Association chair on book trade at the University of Amsterdam; a field in which, again, his interest in culture, business economics, retail and logistics, and location, all come together.