TY - JOUR
T1 - Optimal policies for inventory usage, production and pricing of fashion goods over a selling season
AU - Kogan, K.
AU - Spiegel, U.
PY - 2006/3
Y1 - 2006/3
N2 - A short selling season and highly uncertain demands prior to the season characterize production and selling of fashion goods. Once the season starts and demands turn up with a peak interest in the beginning, monopoly becomes under tremendous pressure to produce the required amount so as not to disappoint its customers. It motivates the monopoly to prepare significant inventories by the opening day. Unfortunately, even the most advanced techniques for demand forecasting are likely to induce either an overestimate or underestimate of the initial inventories. Both affect the monopoly's profit. Overestimation results in surplus, which may never be sold, and excessive inventory holding costs. Underestimation implies sales as well as customer loyalty losses. Given inventory level at the beginning of the selling season, we derive policies of handling this inventory, production capacity and product prices in order to maximize the profit and thus diminish the effect of inherent inaccuracy of initial inventory estimation of fashion goods. A case of bookstore management illustrates the effectiveness of the suggested strategies.
AB - A short selling season and highly uncertain demands prior to the season characterize production and selling of fashion goods. Once the season starts and demands turn up with a peak interest in the beginning, monopoly becomes under tremendous pressure to produce the required amount so as not to disappoint its customers. It motivates the monopoly to prepare significant inventories by the opening day. Unfortunately, even the most advanced techniques for demand forecasting are likely to induce either an overestimate or underestimate of the initial inventories. Both affect the monopoly's profit. Overestimation results in surplus, which may never be sold, and excessive inventory holding costs. Underestimation implies sales as well as customer loyalty losses. Given inventory level at the beginning of the selling season, we derive policies of handling this inventory, production capacity and product prices in order to maximize the profit and thus diminish the effect of inherent inaccuracy of initial inventory estimation of fashion goods. A case of bookstore management illustrates the effectiveness of the suggested strategies.
KW - Control
KW - Inventory
KW - Optimization
UR - http://www.scopus.com/inward/record.url?scp=33644610913&partnerID=8YFLogxK
U2 - 10.1057/palgrave.jors.2602022
DO - 10.1057/palgrave.jors.2602022
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AN - SCOPUS:33644610913
SN - 0160-5682
VL - 57
SP - 304
EP - 315
JO - Journal of the Operational Research Society
JF - Journal of the Operational Research Society
IS - 3
ER -