Reducing the cost of demand uncertainty through accurate response to early sales

Reducing the cost of demand uncertainty through accurate response to early sales

0.00 Avg rating0 Votes
Article ID: iaor20002642
Country: United States
Volume: 44
Issue: 1
Start Page Number: 87
End Page Number: 99
Publication Date: Jan 1996
Journal: Operations Research
Authors: ,
Keywords: scheduling
Abstract:

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.

Reviews

Required fields are marked *. Your email address will not be published.