Physical internet enabled two-tier city logistics solution in the new retail era
| DOI | https://doi.org/10.1108/IMDS-09-2021-0597 |
| Published date | 23 May 2022 |
| Date | 23 May 2022 |
| Pages | 1453-1479 |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
| Author | Hao Luo,Yilun Wang,Zhixing Luo |
Physical internet enabled two-tier
city logistics solution in the
new retail era
Hao Luo
Department of Transportation Economics and Logistics Management,
College of Economics, Shenzhen University, Shenzhen, China, and
Yilun Wang and Zhixing Luo
School of Management and Engineering, Nanjing University, Nanjing, China
Abstract
Purpose –The paper aims to study the challenges and solutions of city logistics in the new retail era. The new
retail, which is characterized by omni-channel, fragmented orders and decentralized 2C distribution, is
becoming the mainstream of the retail industry worldwide. In order to achieve a comprehensive breakthrough
in new retail, the change of order fulfillment mode is the most noteworthy issue. The aim of this paper is to
design a city logistics operation model for new retail and verify its feasibility and efficiency.
Design/methodology/approach –A physical internet (PI) enabled two-tier city logistics solution is
proposed by redefining the key facilities in city logistics with the PI concept. A “Container-as-a-Warehouse”
operation mode is designed to provide a more flexible store and transfer solution. A mathematical model of the
proposed solution is established. An adaptive large neighborhood search (ALNS) is designed based upon an
iterative procedure, which ensures consistent and optimal results.
Findings –To quantitatively assess the feasibility of the proposed solution, a computational experiment is
designed to compare the performance of the proposed model against the conventional two-tier city logistics
operation. The effects of geographical location pattern, utilization of PI-hub as well as the fluctuation of
customer orders are analyzed. The results show that the PI-enabled city logistics is more advantageous than
the conventional solution.
Research limitations/implications –This study does not consider the impact of new technologies in city
logistics; for example, the replenishment problem of unmanned vending machines and the charging problem of
electric vehicles.
Practical implications –The proposed PI-enabled solution and analysis results in this paper have positive
guiding significance for future practical application.
Originality/value –Based on the concept of PI, this paper proposes an innovative and practical operation
model to solve the city logistics challenges.
Keywords Physical internet, City logistics, New retail
Paper type Research paper
1. Introduction
Retailing has changed dramatically in the last two decades due to the advent of the online
channel and ongoing digitalization. E-commerce used to be the core driving force to break the
traditional brick-and-mortar retail stores. In recent years, the rapid growth of sales amount of
e-commerce has reached its development bottleneck. In China, the growth rate declined from
50% in 2011 to 21.3% in 2017. However, based on the increasingly mature digital and
physical infrastructure, the development and reform of the retail industry has not stopped.
The advent of the online channel and new additional digital channels such as mobile channels
City logistics
solution in the
new retail era
1453
The authors would like to thank the anonymous referees and the editor for their constructive and
pertinent comments. This work is supported by National Natural Science Foundation of China (No.
71671116, and No. 71671131), and the Young Elite Scientists Sponsorship Program by China Association
for Science and Technology with Grant Number 2019QNRC0011.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 7 October 2021
Revised 10 January 2022
Accepted 8 February 2022
Industrial Management & Data
Systems
Vol. 122 No. 6, 2022
pp. 1453-1479
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-09-2021-0597
and social media have changed retail business models, the execution of the retail mix and
shopper behavior (Verhoef et al., 2015). A concept of “New Retail”was proposed in 2016 by
Alibaba, the biggest e-commerce company in China. The “new retail”concept, which is taken
as a threat to the other largest global player Amazon, is basically the upgrade form to multi-
channel to omni-channel (Wang and Ng, 2020).
Besides the Alibaba practice in China, the new retail related operations are super popular
and widely adopted in worldwide. For example, Japanese fast-fashion brand Uniqlo initiates
the “buy-online, and pick-up-instore”retailing operations in 2018. Meanwhile, Uniqlo
positions itself as a fashion technology company to go both fashionable and digital. Zara re-
opens its flagship store in Stratford with digital experience, marking the important moment
of fully integrating brick-and-mortar and online stores (Cai and Lo, 2020).
From the perspective of business flow, the transformation from traditional retail to new
retail is mainly reflected in three aspects: business channels, orders pattern, and location of
end customers. At the same time, the change of business flow also promotes the physical flow
to make corresponding changes to adapt to the new environment (see Figure 1).
(1) Business channel: from multichannel to omni-channel
Compared to the multichannel phase in the traditional retail and the early era of e-commerce,
the new retail has the distinct characteristics of omni-channel. Omni-channel synergistically
manages the numerous available channels and customer touchpoints, in such a way that the
customer experience across channels and the performance over channels are optimized
(Verhoef et al., 2015). New channels will break down old barriers such as geography and
consumer ignorance (Brynjolfsson et al., 2013). With the rapid development of new retail,
more and more new business models have emerged. For example, “E-commerce þLive
streaming”(Fei et al., 2021) and community group purchase. These new models further
promote the richness of omni-channel.
(2) Order pattern: from bulk order to fragment order
Due to the omni-channel and direct access to end customers, the order fulfillment model from
suppliers to multi-level distributors in traditional retail has been completely changed.
Compared with high-volume and predictable orders in traditional retail, orders in new retail
will be more unpredictable and fragmented. For example, end consumers make online
purchases directly through social media apps on the manufacturer’s official website.
Entertainment stars or movie stars cooperate with brands to promote their products through
Figure 1.
From traditional retail
to new retail
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