Physical internet enabled two-tier city logistics solution in the new retail era

Purpose The paper aims to study the challenges and solutions of city logistics in the new retail era. The new retail, which is characterized by omni-channel, fragmented orders and decentralized 2C distribution, is becoming the mainstream of the retail industry worldwide. In order to achieve a comprehensive breakthrough in new retail, the change of order fulfillment mode is the most noteworthy issue. The aim of this paper is to design a city logistics operation model for new retail and verify its feasibility and efficiency. Design/methodology/approach A physical internet (PI) enabled two-tier city logistics solution is proposed by redefining the key facilities in city logistics with the PI concept. A "Container-as-a-Warehouse" operation mode is designed to provide a more flexible store and transfer solution. A mathematical model of the proposed solution is established. An adaptive large neighborhood search (ALNS) is designed based upon an iterative procedure, which ensures consistent and optimal results. Findings To quantitatively assess the feasibility of the proposed solution, a computational experiment is designed to compare the performance of the proposed model against the conventional two-tier city logistics operation. The effects of geographical location pattern, utilization of PI-hub as well as the fluctuation of customer orders are analyzed. The results show that the PI-enabled city logistics is more advantageous than the conventional solution. Research limitations/implications This study does not consider the impact of new technologies in city logistics; for example, the replenishment problem of unmanned vending machines and the charging problem of electric vehicles. Practical implications The proposed PI-enabled solution and analysis results in this paper have positive guiding significance for future practical application. Originality/value Based on the concept of PI, this paper proposes an innovative and practical operation model to solve the city logistics challenges.