Operational Strategies for On-demand Delivery Services

On-demand delivery is a new last-mile delivery service, in which customers are expected to receive their purchased goods within the same day, sometimes even within an hour. This service may increase customer satisfaction and therefore boosts online shopping sales. However, it also leads to several operational challenges. We focus mainly on the challenge of short lead times that make delivery consolidation difficult. As a result, canonical last-mile strategies aiming to attain the economy of scale become obsolete, and consequently, they cannot answer the requirements of these expedited services. This dissertation proposes innovative models designed to utilize existing traffic flows and brick-and-mortar store infrastructures. Numerical experiments demonstrate the viability and merits of these models. The results show that the power of the crowd and effectively integrated retail stores can help on-demand delivery service operators to reduce operational costs.