Reducing the cost of demand uncertainty through accurate response to early sales. (English) Zbl 0847.90065

Fisher, Marshall; Raman, Ananth

Oper. Res. 44, No. 1, 87-99 (1996).

Summary: Traditionally, fashion products have incurred high losses due to stockouts and inventory obsolence because long lead times coupled with a concentrated selling season force all or at least most production to be committed before demand information is available. Under a quick response system, lead times are shortened sufficiently to allow a greater portion of production to be scheduled in response to initial demand. We model and analyze the decisions required under quick response and give a method for estimating the demand probability distributions needed in our model. We applied these procedures with a major fashion skiwear firm and found that cost relative to the current informal response system was reduced by enough to increase profits by 60%. Relative to the cost that would have been incurred if no response were used, optimized response reduces cost by enough to roughly quadruple profits.

MSC:

90B30	Production models
90B05	Inventory, storage, reservoirs
90C90	Applications of mathematical programming

Keywords:

fashion products; inventory obsolence; quick response system