A Comparison of Brick-and-Mortar and Online Last Mile Delivery Networks

Driven by the rapid growth of e-commerce, last mile delivery has become an increasingly necessary strategy for retailers to stay competitive. The locations of distribution centers and the capacity of vehicles have profound effects on transportation costs. Demand for same-day delivery services is expected to increase in popularity as new technologies, such as drones and automated transportation, evolve and become cheaper to develop. Organizations that design their logistic network efficiently hold the largest competitive advantage. Amazon is currently an industry leader in shipping and delivery logistics by utilizing its online ordering process. Brick-and-mortar stores such as Walmart and Best Buy are trying to keep pace by similarly offering online ordering and curbside delivery using outsourced delivery services. When considering the most effective method of delivery, one consideration is whether a delivery system can balance its ability to drive down the distance driven by its fleet while increasing the density of packages that are to be delivered. In this regard, modeling and simulation software can be used effectively to run sensitivity analysis to understand key performance indicators of transportation costs, enabling organizations to estimate the most effective ways to deliver products to consumers. Additionally, simulation can be used to make larger organizational decisions relating to the supply chain. In this thesis, logistic simulation modeling software, anyLogistix, is combined with Geographic Information System (GIS) technology to investigate the most cost efficient mode of delivery network. The results of this study demonstrate that a network with fewer distribution centers will have higher transportation costs due to a greater distance to cover