Inventory management in catalog sales companies

One of the main features of the catalog sales industry is the ability to influence demand through the mailing policies. This characteristic forces catalog managers to define coordinated strategies between mailing and inventory decisions. In this paper the authors study inventory policies for each item promoted in the catalog, taking into account the mailing policies. For this purpose, they analyze two different approaches: the global and hierarchical models. Both approaches consider the dynamic and stochastic nature of the problem. Special emphasis is given to the development of a feedback stragegy between the tactical and operational levels, in the hierarchical approach, to avoid ‘infeasibilities’ induced mainly by inventory imbalances. Given the complexity of the formulations, the authors develop heuristics based on the optimal solutions of particular problems. Preliminary computational results show that these heuristics have a satisfactory performance when compared with an upper bound derived for the problem. These results also show that the hierarchical approach has an excellent performance when one feedback from the operational to the tactical level is allowed. This interaction mimics what is usually observed in practice.