Optimal Location and Capacity Planning for Parcel Lockers: A Bi-Level Optimization Model Considering Planners’ and Customers’ Perspectives

Last-mile segments contribute significantly to the delivery costs and environmental impacts of e-commerce networks. Parcel lockers are a sustainable alternative to reduce the inefficiencies in last-mile delivery by offering secure collection points in apartment blocks, workplaces, and railway stations where customers can retrieve their packages at their convenience. However, research addressing optimal parcel-locker placement and its operational-capacity planning is limited in the literature. To this end, this paper presents a bi-level optimization model encompassing the planner’s strategic considerations and customer preferences. In the bi-level model, the upper level focuses on minimizing operational costs for the planner by strategically determining the optimal locations and capacities of parcel lockers. Simultaneously, the lower-level model maximizes customer benefits, factoring in their preferences and behaviors. A case study in Mumbai, India, is provided to demonstrate the effectiveness of the bi-level optimization model. The numerical results show that parcel lockers are located at, and a significant majority of customers are allocated to, those facilities that are in customers’ top two preferences.