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The value of numerical models in quick response assortment planning
- DOI:
- 10.1080/09537287.2010.498576
pages 221-236
Available online: 08 Feb 2011Abstract
In agile supply chains, dependencies in demand for products (in particular correlations) as well as substitution among products, vary substantially, and, due to uncertainty in market acceptance, a substantial share of the portfolio item demands follow bimodal distributions. Typically, advanced heuristics and major simplifying assumptions on these dependencies are needed to reduce the complexity to an appropriate level for analytical solutions of models. By applying a single-period stochastic model to the multi-item substitutable newsvendor problem, we demonstrate that simplifying assumptions on distributions and dependencies can lead to rather poor solutions, and as a consequence, numerical models – despite their obvious inability to produce general data-independent results – have an important role to play in assortment planning. By using a brand name sportswear assortment problem, we show that even when technology and supply chain flexibility allows for continuous information and production updates, the underlying distributional and dependency assumptions used in the planning models are crucial. We note, though, that the value of substitution is high and compensates, to some extent for the lack of information. We have found that the expected profit can drop by as much as 30% when simplifications are applied.
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- Available online: 08 Feb 2011
Author affiliations
- a Molde University College, PO Box 2110, NO-6402 Molde, Norway
- b Department of Management Science, Lancaster University Management School, Lancaster University, Lancaster LA1 4YX, UK
- c Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, Trondheim, Norway
Author biographies
Hajnalka Vaagen is currently a research scientist at SINTEF, Trondheim, Norway, and an associate professor at Molde University College, Molde, Norway. Her research interests are within the field of decision making under uncertainty, with particular focus on dynamically changing agile supply chains, such asfashion and sports apparel. She holds a PhD and MSc in Logistics from Molde University College, and the professional qualification LTI from the Textile Institute Manchester, UK.
Stein W. Wallace is a professor of Operational Research at Lancaster University Management School in UK. He has held professorships at the Chinese University of Hong Kong, Molde University College, Norway and The Norwegian University of Science and Technology. His main interest is decision making underuncertainty, with an emphasis on modelling and applications. He co-authored the world's first textbook on SP in 1994 (with Peter Kall) and has published over 60 articles in peer reviewed journals. He sits on several editorial boards, including INFORMS Journal on Computing. He chaired the international organisation for stochastic programming (COSP) 1992–1995.
Michal Kaut currently holds a post-doctor position at the Norwegian University of Science and Technology (NTNU) in Trondheim, Norway; and a research position at SINTEF research institute in Trondheim, Norway. His main research area is optimisation under uncertainty, with focus on scenariogeneration and other modelling issues. He holds an Ing. (MSc equivalent) from the Czech Technical University in Prague, Czechia; and a DrIng. (PhD equivalent) from NTNU, Trondheim, Norway.
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