##
**Quick response policy with Bayesian information updates.**
*(English)*
Zbl 1091.90005

Summary: In this paper we investigate the quick response (QR) policy with different Bayesian models. Under QR policy, a retailer can collect market information from the sales of a pre-seasonal product whose demand is closely related to a seasonal product’s demand. This information is then used to update the distribution for the seasonal product’s demand by a Bayesian approach. We study two information update models: one with the revision of an unknown mean, and the other with the revision of both an unknown mean and an unknown variance. The impacts of the information updates under both models are compared and discussed. We also identify the features of the pre-seasonal product which can bring more significant profit improvement. We conclude that an effective QR policy depends on a precise information update model as well as a selection of an appropriate pre-seasonal product as the observation target.

### MSC:

90B05 | Inventory, storage, reservoirs |

62B10 | Statistical aspects of information-theoretic topics |

62C10 | Bayesian problems; characterization of Bayes procedures |

PDFBibTeX
XMLCite

\textit{T.-M. Choi} et al., Eur. J. Oper. Res. 170, No. 3, 788--808 (2006; Zbl 1091.90005)

Full Text:
DOI

### References:

[1] | Azoury, K. S., Bayes solution to dynamic inventory models under unknown demand distribution, Management Science, 31, 1150-1160 (1985) · Zbl 0648.90022 |

[2] | Azoury, K. S.; Miller, B. L., A comparison of the optimal ordering levels of Bayesian and non-Bayesian inventory models, Management Science, 30, 993-1003 (1984) · Zbl 0558.90027 |

[3] | Barnes-Schuster, D., Bassok, Y., Anupindi, R., 1999. Coordination and flexibility in supply contracts with options, Working paper, University of Chicago.; Barnes-Schuster, D., Bassok, Y., Anupindi, R., 1999. Coordination and flexibility in supply contracts with options, Working paper, University of Chicago. · Zbl 1103.90344 |

[4] | Berger, J. O., Statistical Decision Theory, Foundations, Concepts and Methods (1980), Springer-Verlag: Springer-Verlag New York-Heidelberg-Berlin · Zbl 0444.62009 |

[5] | Bourland, K. E.; Powell, S. G.; Pyke, D. F., Exploiting timely demand information to reduce inventories, European Journal of Operational Research, 92, 239-253 (1996) · Zbl 0912.90105 |

[6] | Brown, A., Lee, H., 1997. Optimal pay to delta capacity reservation with application to the semiconductor industry, Working paper, Stanford University.; Brown, A., Lee, H., 1997. Optimal pay to delta capacity reservation with application to the semiconductor industry, Working paper, Stanford University. |

[7] | Chen, F., Market segmentation. Advanced demand information, and supply chain performance, Manufacturing and Service Operations Management, 3, 53-67 (2001) |

[8] | Choi, T.M., 2002. Mean-variance analysis for supply chain management models, Ph.D. Thesis, The Chinese University of Hong Kong.; Choi, T.M., 2002. Mean-variance analysis for supply chain management models, Ph.D. Thesis, The Chinese University of Hong Kong. |

[9] | Choi, T. M.; Li, D.; Yan, H., Optimal two-stage ordering policy with Bayesian information updating, Journal of the Operational Research Society, 54, 846-859 (2003) · Zbl 1095.90504 |

[10] | Choi, T. M.; Li, D.; Yan, H., Optimal single ordering policy with multiple delivery modes with Bayesian information updates, Computers and Operations Research, 31, 1965-1984 (2004) · Zbl 1100.90501 |

[11] | Donohue, K. L., Efficient supply contract for fashion goods with forecast updating and two production modes, Management Science, 46, 1397-1411 (2000) · Zbl 1232.90177 |

[12] | Dvoretzky, A.; Kiefer, J.; Wolfowitz, J., The inventory problem: II. Case of unknown distributions of demand, Econometrica, 20, 450-466 (1952) · Zbl 0048.37101 |

[13] | Eppen, G. D.; Iyer, A. V., Backup agreements in fashion buying-the value of upstream flexibility, Management Science, 43, 1469-1484 (1997) · Zbl 0902.90046 |

[14] | Fisher, M.; Raman, A., Reducing the cost of demand uncertainty through accurate response to early sales, Operations Research, 44, 87-99 (1996) · Zbl 0847.90065 |

[15] | Gallego, G.; Ozer, O., Integrating replenishment decisions with advance demand information, Management Science, 47, 1344-1360 (2001) · Zbl 1232.90047 |

[16] | Gilbert, S. M.; Ballou, R. H., Supply chain benefits from advanced customer commitments, Journal of Operations Management, 18, 61-73 (1999) |

[17] | Gurnani, H.; Tang, C. S., Note: Optimal ordering decisions with uncertain cost and demand forecast updating, Management Science, 45, 1456-1462 (1999) · Zbl 1231.90029 |

[18] | Hammond, J.H., 1990. Quick response in the apparel industries, Harvard Business School, N9-690-038, Cambridge, Mass.; Hammond, J.H., 1990. Quick response in the apparel industries, Harvard Business School, N9-690-038, Cambridge, Mass. |

[19] | Iyer, A. V.; Bergen, M. E., Quick response in manufacturer-retailer channels, Management Science, 43, 559-570 (1997) · Zbl 0888.90046 |

[20] | Lau, A. H.L.; Lau, H. S., The effects of reducing demand uncertainty in a manufacturer-retailer channel for single-period products, Computers and Operations Research, 29, 1583-1602 (2002) · Zbl 0994.90060 |

[21] | Lau, H. S.; Lau, A. H.L., Reordering strategies for a newsboy-type product, European Journal of Operational Research, 103, 557-572 (1997) · Zbl 0921.90064 |

[22] | Lee, H. L.; Padmanabhan, P.; Whang, S., Information distortion in a supply chain: The bullwhip effect, Management Science, 43, 546-558 (1997) · Zbl 0888.90047 |

[23] | Lovejoy, W. S., Myopic policies for some inventory models with uncertain demand distributions, Management Science, 36, 724-738 (1990) · Zbl 0704.90019 |

[24] | Murray, G. R.; Silver, E. A., A Bayesian analysis of the style goods inventory problem, Management Science, 12, 785-797 (1966) |

[25] | Ozer, O., Wei, W., 2001. Inventory control with limited capacity and advance demand information, Working paper, Stanford University.; Ozer, O., Wei, W., 2001. Inventory control with limited capacity and advance demand information, Working paper, Stanford University. · Zbl 1165.90332 |

[26] | Pratt, J. W.; Raiffa, H.; Schlaifer, R., Introduction to Statistical Decision Theory (1995), MIT Press |

[27] | Scarf, H., Bayes solutions of the statistical inventory problem, Annals of Mathematical Statistics, 30, 490-508 (1959) · Zbl 0089.36801 |

[28] | Sethi, S. P.; Yan, H.; Zhang, H., Peeling layers of an onion: Inventory model with multiple delivery modes and forecast updates, Journal of Optimization Theory and Applications, 108, 253-281 (2001) · Zbl 1033.90005 |

[29] | Tang, C.S., Rajaram, K., Ou, J., Alptekinoglu, A., 2000. The benefits of advanced booking discount programs: Model and analysis, Working paper, University of California, Los Angeles.; Tang, C.S., Rajaram, K., Ou, J., Alptekinoglu, A., 2000. The benefits of advanced booking discount programs: Model and analysis, Working paper, University of California, Los Angeles. |

This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.