Urban Courier : Operational Innovation and Data-driven Coverage-and-Pricing

The urban courier business is attracting increasing attention with the increasing digitization of intracity services. Although one-to-one delivery is widely adopted to guarantee on-time delivery in traditional urban courier services, it incurs a high transportation cost, burden to city traffic, and carbon footprint. DML-Express, a start-up based in Beijing, China, proposes a novel transshipment-based urban courier (TUC) system as a strategy that achieves a better trade-off between transportation costs and delivery efficiency. In this novel TUC system, large-capacity vehicles are utilized as moving warehouses to flexibly consolidate packages from individual couriers. Because the performance of the TUC system depends significantly on the coordination of the transportation services and the pricing system for consumers, we develop a data-driven coverage-and-pricing model that jointly optimizes the transportation coverage and pricing decisions. In particular, we propose a data-driven robust pricing model in coordination with a transportation coverage model. The theoretical performance guarantees and numerical results verify the robustness of the pricing decision with a limited amount of data. The coverage-and-pricing model can be solved by a decomposition-based heuristic. This heuristic is a valid approximation algorithm under sufficient regularity conditions. The decomposed model can be reformulated as a maximum weighted coverage problem and solved via column generation, where the column-generating sub-problems can be solved efficiently by a dynamic programming algorithm. Numerical experiments and a case study based on operational data from DML-Express demonstrate the efficiency of our method and provide managerial implications for the pricing policy in a TUC system