IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v188y2017icp128-138.html
   My bibliography  Save this article

An off-price retailer with two ordering opportunities and demand updating

Author

Listed:
  • Khouja, Moutaz
  • Zhou, Jing

Abstract

We develop a model of an off-price retailer who has two procurement opportunities for next season. The first opportunity occurs after the end of the current season when the off-price retailer buys excess inventory from retailers and manufacturers and store them until next season. The second opportunity occurs at the beginning of the next selling season when retailers and manufacturers sell anticipated excess inventory, production overruns and irregular units. At the time of the first ordering opportunity the price for the second ordering opportunity is a random variable whose parameters depend on future prevailing economic conditions. Sometime between the first and second ordering opportunities, the off-price retailer observes a market signal which updates her demand forecast. We find that for non-trendy products, the first ordering opportunity provides the off-price retailer with a way to obtain some inventory at a low cost to hedge against the possibility of high demand with higher prices in the next season. We also find that the off-price retailer is less likely to take advantage of the first ordering opportunity in the case of trendy products which have a large premium for newness. Under limited supplies the off-price retailer is more likely to use the first ordering opportunity even when there is a premium for the newness of the second order.

Suggested Citation

  • Khouja, Moutaz & Zhou, Jing, 2017. "An off-price retailer with two ordering opportunities and demand updating," International Journal of Production Economics, Elsevier, vol. 188(C), pages 128-138.
    • Handle: RePEc:eee:proeco:v:188:y:2017:i:c:p:128-138
    DOI: 10.1016/j.ijpe.2017.03.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527317301160
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2017.03.023?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. Terry A. Taylor, 2006. "Sale Timing in a Supply Chain: When to Sell to the Retailer," Manufacturing & Service Operations Management, INFORMS, vol. 8(1), pages 23-42, November.
    2. Akkerman, Renzo & van Donk, Dirk Pieter, 2009. "Product mix variability with correlated demand in two-stage food manufacturing with intermediate storage," International Journal of Production Economics, Elsevier, vol. 121(2), pages 313-322, October.
    3. Mehmet Sekip Altug & Tolga Aydinliyim, 2016. "Counteracting Strategic Purchase Deferrals: The Impact of Online Retailers’ Return Policy Decisions," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 376-392, July.
    4. Haresh Gurnani & Christopher S. Tang, 1999. "Note: Optimal Ordering Decisions with Uncertain Cost and Demand Forecast Updating," Management Science, INFORMS, vol. 45(10), pages 1456-1462, October.
    5. Ma, Lijun & Zhao, Yingxue & Xue, Weili & Cheng, T.C.E. & Yan, Houmin, 2012. "Loss-averse newsvendor model with two ordering opportunities and market information updating," International Journal of Production Economics, Elsevier, vol. 140(2), pages 912-921.
    6. Sen, Alper, 2008. "The US fashion industry: A supply chain review," International Journal of Production Economics, Elsevier, vol. 114(2), pages 571-593, August.
    7. Karen L. Donohue, 2000. "Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes," Management Science, INFORMS, vol. 46(11), pages 1397-1411, November.
    8. Terry A. Taylor & Wenqiang Xiao, 2009. "Incentives for Retailer Forecasting: Rebates vs. Returns," Management Science, INFORMS, vol. 55(10), pages 1654-1669, October.
    9. Jian Li & Suresh Chand & Maqbool Dada & Shailendra Mehta, 2009. "Managing Inventory Over a Short Season: Models with Two Procurement Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 11(1), pages 174-184, April.
    10. T-M Choi & D Li & H Yan, 2003. "Optimal two-stage ordering policy with Bayesian information updating," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 54(8), pages 846-859, August.
    11. Lee, Chang Hwan & Rhee, Byong-Duk, 2007. "Channel coordination using product returns for a supply chain with stochastic salvage capacity," European Journal of Operational Research, Elsevier, vol. 177(1), pages 214-238, February.
    12. Marshall Fisher & Kumar Rajaram & Ananth Raman, 2001. "Optimizing Inventory Replenishment of Retail Fashion Products," Manufacturing & Service Operations Management, INFORMS, vol. 3(3), pages 230-241, November.
    13. Gérard P. Cachon & A. Gürhan Kök, 2007. "Implementation of the Newsvendor Model with Clearance Pricing: How to (and How Not to) Estimate a Salvage Value," Manufacturing & Service Operations Management, INFORMS, vol. 9(3), pages 276-290, October.
    14. Ruiz-Benitez, Rocio & Muriel, Ana, 2014. "Consumer returns in a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 573-592.
    15. Tong Wang & Atalay Atasu & Mümin Kurtuluş, 2012. "A Multiordering Newsvendor Model with Dynamic Forecast Evolution," Manufacturing & Service Operations Management, INFORMS, vol. 14(3), pages 472-484, July.
    16. Guoming Lai & Wenqiang Xiao & Jun Yang, 2012. "Supply Chain Performance Under Market Valuation: An Operational Approach to Restore Efficiency," Management Science, INFORMS, vol. 58(10), pages 1933-1951, October.
    17. Apurva Jain & Kamran Moinzadeh & Yong-Pin Zhou, 2012. "A Single-Supplier, Multiple-Retailer Model with Single-Season, Multiple-Ordering Opportunities, and Fixed Ordering Cost," Operations Research, INFORMS, vol. 60(5), pages 1098-1110, October.
    18. Zhou, Yong-Wu & Wang, Sheng-Dong, 2009. "Manufacturer-buyer coordination for newsvendor-type-products with two ordering opportunities and partial backorders," European Journal of Operational Research, Elsevier, vol. 198(3), pages 958-974, November.
    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. Zheng, Meimei & Dong, Shuangshuang & Zhou, Yaoming & Choi, Tsan-Ming, 2023. "Sourcing decisions with uncertain time-dependent supply from an unreliable supplier," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1365-1379.
    2. Lin, Qi & Zhao, Qiuhong & Lev, Benjamin, 2022. "Influenza vaccine supply chain coordination under uncertain supply and demand," European Journal of Operational Research, Elsevier, vol. 297(3), pages 930-948.

    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. Patra, T. Devi Prasad & Jha, J.K., 2021. "A two-period newsvendor model for prepositioning with a post-disaster replenishment using Bayesian demand update," Socio-Economic Planning Sciences, Elsevier, vol. 78(C).
    2. 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).
    3. Weihua Liu & Donglei Zhu & Yijia Wang, 2017. "Capacity Procurement in Logistics Service Supply Chain with Demand Updating and Rational Expectation Behavior," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-48, December.
    4. Cheaitou, Ali & Cheaytou, Rima, 2019. "A two-stage capacity reservation supply contract with risky supplier and forecast updating," International Journal of Production Economics, Elsevier, vol. 209(C), pages 42-60.
    5. DeYong, Gregory D. & Cattani, Kyle D., 2018. "The unlimited newsvendor: A general solution to a class of two-period newsvendor problems," International Journal of Production Economics, Elsevier, vol. 201(C), pages 173-192.
    6. Patil, Rahul & Avittathur, Balram & Shah, Janat, 2010. "Supply chain strategies based on recourse model for very short life cycle products," International Journal of Production Economics, Elsevier, vol. 128(1), pages 3-10, November.
    7. Niu, Baozhuang & Chu, Lap-Keung & Ni, Jian & Wang, Junwei, 2018. "Buy now and price later: Supply contracts with time-consistent mean–variance financial hedgingAuthor-Name: Li, Qiang," European Journal of Operational Research, Elsevier, vol. 268(2), pages 582-595.
    8. Serel, Doğan A., 2012. "Multi-item quick response system with budget constraint," International Journal of Production Economics, Elsevier, vol. 137(2), pages 235-249.
    9. Jian Li & Suresh Chand & Maqbool Dada & Shailendra Mehta, 2009. "Managing Inventory Over a Short Season: Models with Two Procurement Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 11(1), pages 174-184, April.
    10. Choi, Tsan-Ming & Chow, Pui-Sze, 2008. "Mean-variance analysis of Quick Response Program," International Journal of Production Economics, Elsevier, vol. 114(2), pages 456-475, August.
    11. Cheaitou, Ali & van Delft, Christian & Dallery, Yves & Jemai, Zied, 2009. "Two-period production planning and inventory control," International Journal of Production Economics, Elsevier, vol. 118(1), pages 118-130, March.
    12. Cheaitou, Ali & van Delft, Christian & Jemai, Zied & Dallery, Yves, 2014. "Optimal policy structure characterization for a two-period dual-sourcing inventory control model with forecast updating," International Journal of Production Economics, Elsevier, vol. 157(C), pages 238-249.
    13. Serel, Dogan A., 2009. "Optimal ordering and pricing in a quick response system," International Journal of Production Economics, Elsevier, vol. 121(2), pages 700-714, October.
    14. Juzhi Zhang & Tsan‐Ming Choi & T. C. E. Cheng, 2020. "Stochastic production capacity: A bane or a boon for quick response supply chains?," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(2), pages 126-146, March.
    15. Jiawu Peng & Yue Zhao & Lili Dai, 2023. "Equilibrium Strategy of Production and Order in a Two-Echelon Supply Chain with Demand Information Updates and Capacity Restriction," Mathematics, MDPI, vol. 11(23), pages 1-32, November.
    16. Jiahua Zhang & Lian Qi & Shilu Tong, 2021. "Dynamic Contract under Quick Response in a Supply Chain with Information Asymmetry," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1273-1289, May.
    17. Zhou, Yong-Wu & Wang, Sheng-Dong, 2009. "Manufacturer-buyer coordination for newsvendor-type-products with two ordering opportunities and partial backorders," European Journal of Operational Research, Elsevier, vol. 198(3), pages 958-974, November.
    18. Jinxian Quan & Sung-Won Cho, 2021. "Optimal Ordering Policy for Retailers with Bayesian Information Updating in a Presale System," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    19. Choi, Tsan-Ming, 2007. "Pre-season stocking and pricing decisions for fashion retailers with multiple information updating," International Journal of Production Economics, Elsevier, vol. 106(1), pages 146-170, March.
    20. 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.

    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:proeco:v:188:y:2017:i:c:p:128-138. 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/locate/ijpe .

    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.