Smart Parcel Consolidation at Cainiao.

The article focuses on a novel parcel fulfillment business model proposed by Cainiao Network, the logistics arm of Alibaba Group, which consolidates parcels ordered by the same consumer from multiple merchants during the fulfillment process to increase delivery speed without additional costs. To support this model, three analytics methods were developed: (1) a two-phase online optimization algorithm that dynamically determines parcel consolidation and shipping methods while satisfying delivery time constraints, (2) a statistical method to compute delivery time distributions for on-time delivery (OTD) rate estimation, and (3) a simulation-based optimization method to help managers set appropriate OTD target values. The online optimization algorithm is proven to have sublinear bounds on expected optimality gap and constraint violation, and its effectiveness is validated with real-world data. Since 2020, Cainiao’s system has consolidated millions of parcels shipped from China to over 50 countries, achieving at least a 50% reduction in delivery time and saving tens of millions of dollars annually, benefiting Cainiao, merchants, e-commerce platforms, and consumers.