Order allocation in online retail: Classification and literature review

• First review of the order allocation problem in online retail • Classification of the problem and allocation policies • Key dimensions: Allocation timing and jointly-optimized decisions • Promising future research in problem settings and solution methods Online retail is transforming the way distribution networks are managed. One prominent change is that retailers can now use their full network to fulfil orders. This process involves allocating orders to fulfilment nodes and, depending on the setting, can include other operational decisions, such as order consolidation, shipping mode selection and product substitution. This order allocation problem (OAOR) has garnered considerable attention in recent years. However, there is no comprehensive view of what has been done in the literature, nor a consistent terminology across papers, which makes it hard to position existing work and identify research gaps. To address these concerns, we conduct a systematic literature review, where we find over 60 articles contributing to the OAOR literature. From this review, we formulate the baseline problem, consider multiple extensions, and identify key problem characteristics. Additionally, we analyse and categorize the solution methods found based on the optimization mechanism, policy class, and incorporation of future information and learning. Our review points to several avenues for future research, both in problems and in solution methods.