A crowdsourced physical internet for small parcels delivery

The rapid growth of e-commerce has caused a significant increase in the volume that passes through the parcel delivery industry. Recent advances in the mobile computing technology created new opportunities to redesign the delivery process to make it more efficient and sustainable. Our idea is to utilize the journeys that regular people are making with their cars, to ship small parcels.
We envision a novel logistic process for delivering small parcels by people who subscribe as occasional curriers (OCs). A network of automatic service points (SPs) with lockers is deployed and used as locations where parcels can be dropped off by the senders and picked up by the recipients.  The SPs also serve as intermediate transfer points where parcels can be dropped off by OCs and picked up again later by other OCs. Thus, we use the term physical internet to describe this network. The SPs are strategically located in accessible sites such as gas stations.
The OCs install a location-aware mobile app that offers them monetary rewards to transfer parcels between the SPs during their regular car journeys. The parcels can be transferred to their desired destination SP or intermediate SPs.
We devised a method to route the parcels in the system by determining the offers that the system should make to the OCs such that the expected operational cost is minimized. This cost consists of the payments to the OCs and penalties that are paid to the customers for late delivery. The method is based on a Markov Decision Process (MDP) that solves a simplified version of the problem efficiently.  Next, we devised a more complex incentive mechanism that allows greater profits for the OCs and the operator by reinforcing consolidation of shipments. A heuristic method to resolve this mechanism is proposed. The method combines the policy obtained from the simplified MDP with local solutions of loading optimization problems that are formulated and solved as a mixed integer program. 
We conducted a simulation study using realistic data on the movement of people and parcels. Our preliminary results demonstrate that such a system can provide next day delivery service at a very low operational cost. The system can handle a large volume of parcel traffic by utilizing the excess capacity of private cars in a small fraction of the journeys that the public is doing anyway. The ratio between the rewards paid to the OCs and our conservative estimate of the time needed to handle the parcels is well above the average hourly wage while the average cost of delivering a parcel is significantly below the market price of this service.
 
Joint work with Eyal Tenzer

Short Bio : Tal Raviv is a tenured senior lecturer Industrial Engineering department at the Iby and Aladar Fleischman Faculty of Engineering, Tel Aviv University, Israel. He holds a BA from the Eitan Berglas School of Economics, Tel Aviv University (1993), an MBA from the Recanati School of Business, Tel Aviv University (1997), and a PhD in Operations Research from the William Davidson Faculty of Industrial Engineering and Management, Technion - Israel Institute of Technology, Haifa (2003). He spent two years (2004-2006) as a postdoctoral fellow in the Sauder School of Business at University of British Columbia, Vancouver, Canada. His current primary research interest is in transportation and logistics with a focus on shared mobility systems and sustainable logistics.