Speaker: Alejandro Toriello is a Professor of Industrial and Systems Engineering at Georgia Tech
Title: Customer Satisfaction and Differentiated Pricing in E-Retail Delivery
Date: 7th October 2025, Wednesday
Time: 17:00
This is an online seminar. To request event details please send a message to department.
Abstract: We study a system in which a common delivery fleet provides service to both same-day delivery (SDD) and next-day delivery (NDD) orders placed by e-retail customers who are sensitive to delivery prices. We develop a model of the system and optimize with respect to two separate objectives. First, empirical research suggests that fulfilling e-retail orders ahead of promised delivery days increases a firm’s long-run market share. Motivated by this phenomenon, we optimize for customer satisfaction by maximizing the quantity of NDD orders fulfilled one day early given fixed prices. Next, we optimize for total profit; we optimize for a single SDD price, and we then set SDD prices in a two-level scheme with discounts for early-ordering customers. Our analysis relies on continuous approximation techniques to capture the interplay between NDD and SDD orders, and particularly the effect one day’s operations have on the next, a novel modeling component not present in SDD-only models; a key technical result is establishing the model’s convergence to a steady state using dynamical systems theory. We derive structural insights and efficient algorithms for both objectives. In a case study set in metropolitan Denver, approximately 10% of NDD orders can be fulfilled one day early at optimality, and profit is increased by 1-3% in a two-level pricing scheme versus a one-level scheme. We conduct operational simulations for validation of solutions and analysis of initial conditions. (Joint work with Dipayan Banerjee and Alan Erera).
Bio: Alejandro Toriello is a Professor of Industrial and Systems Engineering at Georgia Tech, where he also obtained his BS (2003) and PhD (2010). His research interests include transportation, logistics and optimization, particularly problems motivated by e-commerce, the “last mile”, cloud computing, online advertisement and resource allocation. Toriello is Scientific Director of Tech’s Supply Chain and Logistics Institute, area editor for Transportation Science, and was the 2023 President of the INFORMS Transportation Science and Logistics (TSL) Society. He is a recipient of the National Science Foundation’s CAREER award and winner of the 2024 Dafermos Mid-Career Award from INFORMS TSL.