Inventory redistribution for fashion products under demand parameter update

G.P. Kiesmuller, S. Minner

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Abstract

Demand for fashion products is usually highly uncertain. Often, there is only one possibility for procurement before the selling season. In order to improve the traditional newsvendor-type overage-underage trade-off we study a network of two expected profit maximizing retailers selling a fashion product where there is an additional opportunity for redistribution of stock during the selling season. We distinguish between the situation where redistribution is done at the moment when one of the retailers is running out of stock and the situation where the redistribution time is already determined and fixed before the selling season. We model the demand process at a retailer by a Poisson Process with an uncertain mean and use a Bayesian approach to update the distribution parameters before transshipments are done. In a numerical study we compare the different policies and show that timing flexibility and updating are especially beneficial in situations with low profit margins and high parameter uncertainty. Further, we show that depending on the instance, an optimal predetermined transshipment timing depends on the problem parameters and may be between the middle and the end of the selling season.
Original languageEnglish
Place of PublicationEindhoven
PublisherTechnische Universiteit Eindhoven
Number of pages19
ISBN (Print)978-90-386-1911-8
Publication statusPublished - 2009

Publication series

NameBETA publicatie : working papers
Volume275
ISSN (Print)1386-9213

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