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Optimizing Inventory Replenishment of Retail Fashion Products


  • Marshall Fisher

    (The Wharton School, University of Pennsylvania, 3620 Locust Walk, 3207 SH-DH, Philadelphia, Pennsylvania 19104-6366)

  • Kumar Rajaram

    (University of California, Los Angeles, Anderson School of Management, Los Angeles, California 90095-1481)

  • Ananth Raman

    (Harvard Business School, Soldiers Field, Boston, Massachusetts 02163)


We consider the problem of determining (for a short lifecycle) retail product initial and replenishment order quantities that minimize the cost of lost sales, back orders, and obsolete inventory. We model this problem as a two-stage stochastic dynamic program, propose a heuristic, establish conditions under which the heuristic finds an optimal solution, and report results of the application of our procedure at a catalog retailer. Our procedure improves on the existing method by enough to double profits. In addition, our method can be used to choose the optimal reorder time, to quantify the benefit of leadtime reduction, and to choose the best replenishment contract.

Suggested Citation

  • Marshall Fisher & Kumar Rajaram & Ananth Raman, 2001. "Optimizing Inventory Replenishment of Retail Fashion Products," Manufacturing & Service Operations Management, INFORMS, vol. 3(3), pages 230-241, November.
  • Handle: RePEc:inm:ormsom:v:3:y:2001:i:3:p:230-241

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    References listed on IDEAS

    1. 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.
    2. Warren H. Hausman & Rein Peterson, 1972. "Multiproduct Production Scheduling for Style Goods with Limited Capacity, Forecast Revisions and Terminal Delivery," Management Science, INFORMS, vol. 18(7), pages 370-383, March.
    3. Hirofumi Matsuo, 1990. "A Stochastic Sequencing Problem for Style Goods with Forecast Revisions and Hierarchical Structure," Management Science, INFORMS, vol. 36(3), pages 332-347, March.
    4. George R. Murray, Jr. & Edward A. Silver, 1966. "A Bayesian Analysis of the Style Goods Inventory Problem," Management Science, INFORMS, vol. 12(11), pages 785-797, July.
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    Cited by:

    1. Harish Krishnan & Roman Kapuscinski & David A. Butz, 2010. "Quick Response and Retailer Effort," Management Science, INFORMS, vol. 56(6), pages 962-977, June.
    2. Chung, Chia-Shin & Flynn, James & Kirca, Omer, 2008. "A multi-item newsvendor problem with preseason production and capacitated reactive production," European Journal of Operational Research, Elsevier, vol. 188(3), pages 775-792, August.
    3. Patil, Rahul & Avittathur, Balram & Shah, Janat, 2010. "Supply chain strategies based on recourse model for very short life cycle products," International Journal of Production Economics, Elsevier, vol. 128(1), pages 3-10, November.
    4. Caulkins, Jonathan P. & Hartl, Richard F. & Kort, Peter M. & Feichtinger, Gustav, 2007. "Explaining fashion cycles: Imitators chasing innovators in product space," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1535-1556, May.
    5. Gérard P. Cachon & A. Gürhan Kök, 2007. "Implementation of the Newsvendor Model with Clearance Pricing: How to (and How Not to) Estimate a Salvage Value," Manufacturing & Service Operations Management, INFORMS, vol. 9(3), pages 276-290, October.
    6. Mostard, Julien & de Koster, Rene & Teunter, Ruud, 2005. "The distribution-free newsboy problem with resalable returns," International Journal of Production Economics, Elsevier, vol. 97(3), pages 329-342, September.
    7. Choi, Tsan-Ming & Chow, Pui-Sze, 2008. "Mean-variance analysis of Quick Response Program," International Journal of Production Economics, Elsevier, vol. 114(2), pages 456-475, August.
    8. repec:eee:proeco:v:193:y:2017:i:c:p:647-653 is not listed on IDEAS
    9. Baruah, Pundarikaksha, 2006. "Supply Chains Facing Atypical Demand: Optimal Operational Policies And Benefits Under Information Sharing," MPRA Paper 16101, University Library of Munich, Germany.
    10. Karakul, M., 2008. "Joint pricing and procurement of fashion products in the existence of clearance markets," International Journal of Production Economics, Elsevier, vol. 114(2), pages 487-506, August.
    11. Cheaitou, Ali & van Delft, Christian & Dallery, Yves & Jemai, Zied, 2009. "Two-period production planning and inventory control," International Journal of Production Economics, Elsevier, vol. 118(1), pages 118-130, March.
    12. repec:spr:annopr:v:237:y:2016:i:1:d:10.1007_s10479-013-1453-x is not listed on IDEAS
    13. Mostard, Julien & Teunter, Ruud & de Koster, René, 2011. "Forecasting demand for single-period products: A case study in the apparel industry," European Journal of Operational Research, Elsevier, vol. 211(1), pages 139-147, May.
    14. Wanke, Peter F., 2008. "The uniform distribution as a first practical approach to new product inventory management," International Journal of Production Economics, Elsevier, vol. 114(2), pages 811-819, August.
    15. Li, Xiang & Li, Yongjian & Cai, Xiaoqiang, 2011. "On a multi-period supply chain system with supplementary order opportunity," European Journal of Operational Research, Elsevier, vol. 209(3), pages 273-284, March.
    16. Fang, Xin & Zhang, Cheng & Robb, David J. & Blackburn, Joseph D., 2013. "Decision support for lead time and demand variability reduction," Omega, Elsevier, vol. 41(2), pages 390-396.
    17. repec:eee:proeco:v:188:y:2017:i:c:p:128-138 is not listed on IDEAS
    18. Serel, Dogan A., 2009. "Optimal ordering and pricing in a quick response system," International Journal of Production Economics, Elsevier, vol. 121(2), pages 700-714, October.
    19. Kirthi Kalyanam & Sharad Borle & Peter Boatwright, 2007. "Deconstructing Each Item's Category Contribution," Marketing Science, INFORMS, vol. 26(3), pages 327-341, 05-06.
    20. Ananth V. Iyer & Vinayak Deshpande & Zhengping Wu, 2003. "A Postponement Model for Demand Management," Management Science, INFORMS, vol. 49(8), pages 983-1002, August.


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