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Assortment Optimization with Product Level Demand and Substitution Information

Author

Listed:
  • Lihua Bai

    (Department of Industrial Engineering, University of Miami, Coral Gables, USA)

  • Junyan Wang

    (Logistics Engineering Department, Tianjin University of Science and Technology, Tianjin, China)

  • Nazrul I. Shaikh

    (Department of Industrial Engineering, University of Miami, Coral Gables, USA)

Abstract

This article presents a mathematical model for jointly optimizing base stock levels for the multiple items subject to service level goals. The proposed model uses the expected demand and substitution probabilities between products as inputs and has been used to analyze the effects of demand variability on profitability under service level constraint. The results of the analysis demonstrate that neglecting customer-driven substitution or excluding the impacts of variability and correlations in demand leads to significantly inefficient assortments.

Suggested Citation

  • Lihua Bai & Junyan Wang & Nazrul I. Shaikh, 2018. "Assortment Optimization with Product Level Demand and Substitution Information," International Journal of Information Systems and Supply Chain Management (IJISSCM), IGI Global, vol. 11(3), pages 46-63, July.
    • Handle: RePEc:igg:jisscm:v:11:y:2018:i:3:p:46-63
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