IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v63y2016icp123-133.html
   My bibliography  Save this article

Late season low inventory assortment effects in the newsvendor problem

Author

Listed:
  • Khouja, Moutaz

Abstract

The assumption of the newsvendor being able to satisfy demand as long as on-hand inventory is positive does not hold for a non-homogenous product. Consumers who do not find a unit of the product which satisfies their secondary features preferences may not purchase the product even though the newsvendor has positive on-hand inventory. This is likely to occur late in the season as inventory level declines. We solve a newsvendor problem in which the probability of purchase by consumers is increasing in on-hand inventory for any inventory level below that which is needed to have a complete assortment. We identify the sufficient optimality condition for the order quantity. We show that, unlike the case of inventory-dependent demand models in the literature, the optimal order quantity may decrease due to the assortment effect. We investigate two types of pre-end of season discounts, immediate all-units and delayed, as ways to mitigate the late season assortment effect and show that in some cases, they can increase the newsvendor׳s profit and free up the shelf space for other products.

Suggested Citation

  • Khouja, Moutaz, 2016. "Late season low inventory assortment effects in the newsvendor problem," Omega, Elsevier, vol. 63(C), pages 123-133.
    • Handle: RePEc:eee:jomega:v:63:y:2016:i:c:p:123-133
    DOI: 10.1016/j.omega.2015.10.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048315002121
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.omega.2015.10.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chung, Chia-Shin & Flynn, James & Zhu, Jishan, 2009. "The newsvendor problem with an in-season price adjustment," European Journal of Operational Research, Elsevier, vol. 198(1), pages 148-156, October.
    2. Abbott, Harish & Palekar, Udatta S., 2008. "Retail replenishment models with display-space elastic demand," European Journal of Operational Research, Elsevier, vol. 186(2), pages 586-607, April.
    3. Youyi Feng & Baichun Xiao, 2000. "Optimal Policies of Yield Management with Multiple Predetermined Prices," Operations Research, INFORMS, vol. 48(2), pages 332-343, April.
    4. Gerard Cachon, 2001. "Managing a Retailer's Shelf Space, Inventory, and Transportation," Manufacturing & Service Operations Management, INFORMS, vol. 3(3), pages 211-229, July.
    5. Kirthi Kalyanam & Sharad Borle & Peter Boatwright, 2007. "Deconstructing Each Item's Category Contribution," Marketing Science, INFORMS, vol. 26(3), pages 327-341, 05-06.
    6. Bacel Maddah & Ebru K. Bish & Hussein Tarhini, 2014. "Newsvendor pricing and assortment under Poisson decomposition," IISE Transactions, Taylor & Francis Journals, vol. 46(6), pages 567-584, June.
    7. Felipe Caro & Jérémie Gallien, 2010. "Inventory Management of a Fast-Fashion Retail Network," Operations Research, INFORMS, vol. 58(2), pages 257-273, April.
    8. Stephen A. Smith & Dale D. Achabal, 1998. "Clearance Pricing and Inventory Policies for Retail Chains," Management Science, INFORMS, vol. 44(3), pages 285-300, March.
    9. Jammernegg, Werner & Kischka, Peter, 2013. "The price-setting newsvendor with service and loss constraints," Omega, Elsevier, vol. 41(2), pages 326-335.
    10. Felipe Caro & Jérémie Gallien, 2012. "Clearance Pricing Optimization for a Fast-Fashion Retailer," Operations Research, INFORMS, vol. 60(6), pages 1404-1422, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    2. Namin, Aidin & Soysal, Gonca P. & Ratchford, Brian T., 2022. "Alleviating demand uncertainty for seasonal goods: An analysis of attribute-based markdown policy for fashion retailers," Journal of Business Research, Elsevier, vol. 145(C), pages 671-681.
    3. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.
    4. Pol Boada-Collado & Victor Martínez-de-Albéniz, 2020. "Estimating and Optimizing the Impact of Inventory on Consumer Choices in a Fashion Retail Setting," Manufacturing & Service Operations Management, INFORMS, vol. 22(3), pages 582-597, May.
    5. Jérémie Gallien & Adam J. Mersereau & Andres Garro & Alberte Dapena Mora & Martín Nóvoa Vidal, 2015. "Initial Shipment Decisions for New Products at Zara," Operations Research, INFORMS, vol. 63(2), pages 269-286, April.
    6. Nathan C. Craig & Ananth Raman, 2016. "Improving Store Liquidation," Manufacturing & Service Operations Management, INFORMS, vol. 18(1), pages 89-103, February.
    7. Kris Johnson Ferreira & Bin Hong Alex Lee & David Simchi-Levi, 2016. "Analytics for an Online Retailer: Demand Forecasting and Price Optimization," Manufacturing & Service Operations Management, INFORMS, vol. 18(1), pages 69-88, February.
    8. Omar Besbes & Adam N. Elmachtoub & Yunjie Sun, 2020. "Pricing Analytics for Rotable Spare Parts," Interfaces, INFORMS, vol. 50(5), pages 313-324, September.
    9. Stephen A. Smith & Narendra Agrawal, 2017. "Optimal Markdown Pricing and Inventory Allocation for Retail Chains with Inventory Dependent Demand," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 290-304, May.
    10. Elçin Ergin & Mehmet Gümüş & Nathan Yang, 2022. "An Empirical Analysis of Intra‐Firm Product Substitutability in Fashion Retailing," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 607-621, February.
    11. Vincent C. Li & Yat-wah Wan & Chi-Leung Chu & Yi-Cheng Lin, 2020. "A Dynamic Programming-Based Heuristic for Markdown Pricing and Inventory Allocation of a Seasonal Product in a Retail Chain," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(01), pages 1-30, January.
    12. Miguel Afonso Sellitto & Domingos Rafael Ferla Valladares & Erica Pastore & Arianna Alfieri, 2022. "Comparing Competitive Priorities of Slow Fashion and Fast Fashion Operations of Large Retailers in an Emerging Economy," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 23(1), pages 1-19, March.
    13. Khouja, Moutaz & Christou, Eliana & Stylianou, Antonis, 2020. "A heuristic approach to in-season capacity allocation in a multi-product newsvendor model," Omega, Elsevier, vol. 95(C).
    14. Felipe Caro & Jérémie Gallien, 2012. "Clearance Pricing Optimization for a Fast-Fashion Retailer," Operations Research, INFORMS, vol. 60(6), pages 1404-1422, December.
    15. Osmud Rahman & Dingtao Hu & Benjamin C. M. Fung, 2023. "A Systematic Literature Review of Fashion, Sustainability, and Consumption Using a Mixed Methods Approach," Sustainability, MDPI, vol. 15(16), pages 1-37, August.
    16. Namin, Aidin & Ratchford, Brian T. & Soysal, Gonca P., 2017. "An empirical analysis of demand variations and markdown policies for fashion retailers," Journal of Retailing and Consumer Services, Elsevier, vol. 38(C), pages 126-136.
    17. Mehran Ullah & Irfanullah Khan & Biswajit Sarkar, 2019. "Dynamic Pricing in a Multi-Period Newsvendor Under Stochastic Price-Dependent Demand," Mathematics, MDPI, vol. 7(6), pages 1-15, June.
    18. Bernardo Bertoldi & Chiara Giachino & Alberto Pastore, 2016. "Strategic pricing management in the omnichannel era," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2016(4), pages 131-152.
    19. Avittathur, Balram & Biswas, Indranil, 2017. "A note on limited clearance sale inventory model," International Journal of Production Economics, Elsevier, vol. 193(C), pages 647-653.
    20. Dennis J. Zhang & Hengchen Dai & Lingxiu Dong & Qian Wu & Lifan Guo & Xiaofei Liu, 2019. "The Value of Pop-Up Stores on Retailing Platforms: Evidence from a Field Experiment with Alibaba," Management Science, INFORMS, vol. 65(11), pages 5142-5151, November.

    More about this item

    Keywords

    Inventory control; Marketing;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:63:y:2016:i:c:p:123-133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.