Time‐restricted batching models and solution approaches for integrated forward and return product flow handling in warehouses

With the rise of Internet sales, retailers witness increases in returned products, generally because website pictures and specifications tend to be insufficient for customers to determine the right size, colour or suitability of a product. Efficient processing of the return flow can improve inventory management and increase the utilisation of warehouse capacities. Moreover, short response times to customer orders and on‐time delivery are critical and shape warehouse operations. To address the problem of integrated order and return job batching, this article proposes two optimisation models with constraints on the delivery time. We propose different objectives in offline and online contexts which require unique solution approaches. Time constraints also need to be taken into account to exploit the different characteristics of order and return jobs, as well as to incorporate response time‐oriented objectives. Computational examples confirm the effectiveness of included returns and the impact of consumer‐oriented objectives. Finally, a comparison of the proposed solution approaches with batching procedures used by a library warehouse indicates significant savings in travel distance through integrated order and return job processing.