A continuous review policy for e-commerce inventory management in darkstores

Abstract

The demand placement in e-commerce retail provides a lot of research opportunities. The delay between the order request and depletion from the inventory (reffered to as “ordering window”) allows the retailer to take advantage in order to reduce holding and stockout costs. In this research we want to assess the potential advantages of using a customized inventory policy to be implemented in the darkstores that takes into account this flexibility. This study presents an (s;Q) inventory policy that explicitly accounts for the ordering window. We consider that the customer demand as well as the customer ordering window are stochastic, and we focus in the products that are fulfilled through the darkstore. Considering the flexibility provided by the ordering windows we are able to find the optimal parameters for the policy, applying an iterative procedure that uses analytical expressions. The study provides a numerical experiment using simulation to validate the policy. It also incorporates a numerical comparison of the total cost between the traditional policy and the adapted policy to e-commerce retail that this study develops. Our policy provides significant savings. Nevertheless, this is just a first step in exploring inventory policies that account for the ordering window of e-commerce customers.