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Managing Fashion Goods Inventories:

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Author Info

  • Petruzzi, Nicholas

    (U of Illinois at Urbana-Champaign)

  • Monahan, George E.

    (U of Illinois at Urbana-Champaign)

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    Abstract

    The proliferation of both online and bricks and mortar outlet stores underscores the observation that secondary markets are readily accessible to retailers of short-life-cycle products. These secondary markets provide recourse channels for retailers to sell excess inventory of out of favor items at reduced prices when overstocking occurs in a primary market. We study the problem of determining when a retailer should terminate its primary selling season by selling remaining inventory on a secondary market. The retailer has a single opportunity to procure prior to a primary selling season consisting of multiple periods. Demand in each period is random,but correlated. At the end of each period, any remaining inventory incurs a holding cost. Then,based upon the current level of inventory and the cumulative demand-to-date,the retailer decides either to terminate the primary selling season by selling all or part of the remaining inventory on a secondary market,or to extend the current primary selling season by another period. We develop structural properties of the optimal policy for determining when to terminate the primary selling season,and we develop corresponding implications for procurement.

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    File URL: http://www.business.illinois.edu/Working_Papers/papers/02-0117.pdf
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    Bibliographic Info

    Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 02-0117.

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    Date of creation: 2002
    Date of revision:
    Handle: RePEc:ecl:illbus:02-0117

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    Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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    1. William S. Lovejoy, 1990. "Myopic Policies for Some Inventory Models with Uncertain Demand Distributions," Management Science, INFORMS, vol. 36(6), pages 724-738, June.
    2. A. A. Tsay & W. S. Lovejoy, 1999. "Quantity Flexibility Contracts and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 1(2), pages 89-111.
    3. Youyi Feng & Guillermo Gallego, 2000. "Perishable Asset Revenue Management with Markovian Time Dependent Demand Intensities," Management Science, INFORMS, vol. 46(7), pages 941-956, July.
    4. Gabriel R. Bitran & Susana V. Mondschein, 1997. "Periodic Pricing of Seasonal Products in Retailing," Management Science, INFORMS, vol. 43(1), pages 64-79, January.
    5. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    6. Samuel Karlin, 1960. "Dynamic Inventory Policy with Varying Stochastic Demands," Management Science, INFORMS, vol. 6(3), pages 231-258, April.
    7. Gary D. Eppen & Ananth. V. Iyer, 1997. "Backup Agreements in Fashion Buying---The Value of Upstream Flexibility," Management Science, INFORMS, vol. 43(11), pages 1469-1484, November.
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