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Optimizing Inventory Replenishment of Retail Fashion Products

Optimizing Inventory Replenishment of Retail Fashion Products We consider the problem of determining (for a short lifecycle) retail product initial and replenishment order quantities that minimize the cost of lost sales, back orders, and obsolete inventory. We model this problem as a two-stage stochastic dynamic program, propose a heuristic, establish conditions under which the heuristic finds an optimal solution, and report results of the application of our procedure at a catalog retailer. Our procedure improves on the existing method by enough to double profits. In addition, our method can be used to choose the optimal reorder time, to quantify the benefit of leadtime reduction, and to choose the best replenishment contract. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Manufacturing & Service Operations Management INFORMS

Optimizing Inventory Replenishment of Retail Fashion Products

12 pages

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References (11)

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article - Focused Issue: Retail Operations Management
ISSN
1523-4614
eISSN
1526-5498
DOI
10.1287/msom.3.3.230.9889
Publisher site
See Article on Publisher Site

Abstract

We consider the problem of determining (for a short lifecycle) retail product initial and replenishment order quantities that minimize the cost of lost sales, back orders, and obsolete inventory. We model this problem as a two-stage stochastic dynamic program, propose a heuristic, establish conditions under which the heuristic finds an optimal solution, and report results of the application of our procedure at a catalog retailer. Our procedure improves on the existing method by enough to double profits. In addition, our method can be used to choose the optimal reorder time, to quantify the benefit of leadtime reduction, and to choose the best replenishment contract.

Journal

Manufacturing & Service Operations ManagementINFORMS

Published: Jul 30, 2001

Keywords: Keywords : Retailing ; Inventory Replenishment ; Stochastic Dynamic Programming ; Heuristics

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