Designing profit-maximizing omnichannel distribution networks for high responsiveness

The network posture of omnichannel retailers, encompassing dedicated urban fulfillment centers (UFCs) and/or selected stores (omnistores) for order fulfillment, directly influences their ability to provide responsive delivery services. In turn, customers’ willingness to purchase online is shaped by the responsiveness level offered, impacting overall sales revenue. To address this business context, we introduce a responsive omnichannel distribution network design problem under a probabilistic, offer-dependent customer channel choice framework. At the strategic level, our approach optimizes the selection of delivery service offers by demand zone while jointly determining the number and location of UFCs and omnistores. We formulate a two-stage stochastic distribution network design model that maximizes expected profit. Demand scenarios are derived from a discrete choice model that captures customer preferences between online and offline channels, contingent on the retailer’s responsiveness level. To account for last-mile delivery complexities, we employ a refined pixelization of urban delivery areas and develop a precise calculation of Order-to-Delivery Time (ODT). Managerial insights from a case study of an omnichannel retailer in France highlight the advantages of deploying UFCs and omnistores, yielding up to an 8% profit increase under high responsiveness. Our results demonstrate the effectiveness of the proposed model in capturing customer willingness to buy online, with network offerings shifting to next-day delivery in up to 60% of demand zones.