The Value of Information in Quick Response Supply Chains: An Assortment Planning View

Many see timely accurate information availability as the key of successful customer-behaviour-reactive, wait-and-see planning in agile environments. Because of the extensive use of lean retailing, these quick response (QR) strategies require substantially reduced lead times across the supply chain, with the competitive advantage of enabling constant new product supply. However, successful market attempts are rapidly copied by the competition, leading to an accelerating spiral of variety-pricing games, with the inevitable result of often trivial product differentiation, reduced quality and pressure on prices. The environmental, psychological and operational effects of this spiral are severe. This work discusses the operational aspects from an assortment planning point of view, referring to the products to be included in the portfolio, as well as their inventory levels. The aim is to shift focus from timely information availability across the supply chain and wait-and-see planning, to the actual information needed to make substantial and potentially important changes, and to information available at the time when important decisions are to be taken. A proposed decision support framework - with corresponding tool set of estimation and optimization methods - helps evaluating this, by measuring the value and risk of different assortment strategies, and decisions taken at different information levels. The estimation and optimization models presented here are consistent in their use of subjective knowledge and in emphasizing the importance of attribute-based assortment planning in contemporary QR supply chains.