Zone skipping vs direct shipment of small orders: Integrating order processing and optimization

This paper describes an integrated approach to the zone skipping problem which seeks to determine an optimal shipping plan for goods to be shipped by a parcel delivery system. Goods can either be directly sent via a package carrier such as UPS or can be drop shipped to the destination zone or to an intermediate zone package carrier distribution center for direct shipment from that point. The approach presented in this paper uses a preprocessing step which computes aggregate costs for alternate shipping possibilities for each specific load, whether direct shipped or drop shipped. An easy to use and maintain system is designed which merges transaction processing and modeling to solve the problem. The advantages of the specific integer linear programming algorithm used in this system are discussed. The approach is illustrated with data from a retail mail order firm.