A decision-support system that helps retailers decide order quantities and markdowns for fashion goods

A decision-support system that helps retailers decide order quantities and markdowns for fashion goods

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Article ID: iaor20021625
Country: United States
Volume: 31
Issue: 3
Publication Date: May 2001
Journal: Interfaces
Authors: ,
Keywords: marketing, programming: dynamic
Abstract:

We developed MARK, a stochastic dynamic-programming model-based decision-support system, specifically to help retail-store buyers of fashion goods decide on optimal merchandise order quantities and markdown prices. We implemented MARK as an interactive software program that runs on users' personal computers and can be integrated with the retailers' point-of-sale (POS) and other information systems. As we show in an actual-case illustration, MARK improved profitability and managers' understanding of the decision problems. MARK also provides valuable insights into the interplay between order-quantity and dynamic-pricing decisions. For example, higher markdown percentages do not necessarily mean lower profits.

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