In this master’s thesis, we address predicting the store order demand within the last-mile delivery logistics process. The goal is to generate accurate predictions of the number of orders by regions and time slots and later apply the predictions to a practical example of the vehicle routing problem (VRP).
The input data consists of real-world data from an anonymous online store, which is aggregated by regions and time slots. Due to GDPR and the company’s privacy concerns, we cannot publish the real data, so it was necessary to anonymize it first. The anonymization process involved standardizing time slots, filling empty gaps in the data and adding noise. We defined a new delivery area and used clustering on addresses to automatically define regions (polygons). Anonymized data was then scaled and applied to the newly defined regions. The final dataset was then analyzed to gain insight into the structure and dependencies, which later helped define more accurate prediction models.
The first step of predicting was to define some baseline statistical models, which we later used for comparison with more complex ones. Statistical models included the last week model, the average by days of the week model, the weighted weekly average model and the Divide et impera aggregation model. We also implemented a random forest model and an LSTM model. Best results on the test dataset were achieved by the Divide et impera model, which shows that in this case, more complex models do not outperform simple statistical ones. That means that complex models are not worth the effort in practice. We can also see that due to the data structure (small regions with high noise), it is better to predict the number of orders for the whole area and then split the prediction by regions based on their size.
The importance of prediction in the whole logistics process was verified by simulating the vehicle routing problem. We compared delivery success and VRP solution quality between a scenario in which customers could choose delivery time slots arbitrarily and a scenario in which some customers had limited choices based on the previously generated prediction. Tests confirmed that good prediction combined with limiting delivery time slots led to more delivered orders, better vehicle utilization and lower total cost per order for the logistics company.
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