The Impact of Committing to Customer Orders in Online Retail

Problem definition: Online retailers are on a consistent drive to increase on-time delivery and reduce customer lead time. However, in reality, an increasing share of consumers places orders early. Academic/practical relevance: Such advance demand information can be deployed strategically costs improve the service experience. This requires inventory allocation policies that make optimal use this induce place their An number online not only offer customers choice time but also, actively back-order missing items from consumer basket. Methodology: We develop new commit order upon arrival rather than at moment is due. provide analytical results for performance these evaluate behavior with real data large food retailer. Results: Our policy leads higher fill rate expense slight average delay. The analysis based real-life suggests sizeable impact should current best practices retail. Managerial implications: With changing landscape retail, increasingly baskets they would like receive planned confirmed Especially grocery, has grown fast. fundamentally changes strategic management inventory. demonstrate early enhance experience eventually, also create opportunities reducing cost operations. Supplemental Material: appendix available https://doi.org/10.1287/msom.2022.1124 .