Optimizing Order Dispatch Decisions under Delivery Window Constraints

Abstract: This study focuses on order dispatch decisions within two-echelon supply chains, where order dispatch creates economic shipments to reduce delivery costs. Dispatching orders is often constrained by delivery windows, leading to penalty costs for untimely deliveries. Prolonged dispatch times can increase the lead time of orders and potentially violate these delivery windows. To balance the trade-offs between lead time and economic delivery, this study introduces a simulation-optimization approach for determining optimal ordering and dispatch rules. It emphasizes the intricacies of the order dispatch process and explores how these can be integrated into the simulation-optimization procedure to improve ordering and delivery decisions. The study evaluates various options for implementing dispatch rules, including the number of dispatch queues and prioritized dispatch. The results indicate that a single-queue, quantity-based, first-in-first-out dispatch approach achieves the greatest cost reduction while maintaining a desirable service level.