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

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.


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