Author
Çömez-Dolgan, Nagihan, Fescioglu-Unver, N., Cephe, E., Şen, A.
Publication Date
2021-11-01
Publication Place
-
Elsevier
Subject
Production, Production variety, Substitution, Assortment capacity, Exogenous demand
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
0377-2217
Record ID
166cf92c-5536-416b-963d-655af47c3a83
Library Location
Management Information Systems
Date
2021-11-01
Notes
TÜBİTAK
Sample Text
Buyers have easier access to a variety of products with the rise of multi-channel distribution strategies and the increase in new product introductions. On the other hand, firms experience greater pressure in offering the correct product variety given that the manufacturing infrastructure often imposes physical and financial constraints in attaining variety. This study examines a firm's optimal assortment planning problem under an exogenous demand model, where each customer has a predetermined preference for each product from a potential set. Proportional demand substitutions are allowed from out-of-assortment products to those available. We show that the problem is NP-complete. We also show that an optimal assortment is composed of some number of the highest margin products, if one product having a higher margin than another implies that the former product has a lower demand rate than the latter. The firm's assortment capacity is fully utilized at the optimum if the customers’ substitution ratio does not exceed a particular threshold. We also introduce several approximate assortment policies that can be easily implemented, and test these policies through extensive numerical analyses. The results reveal that some of the policies can provide less than a 1% profit gap with an optimal solution for a 20-product set. The policy's performance highly depends on the firm's assortment capacity-to-product set size ratio. Moreover, we provide performance bounds for two of these well-performing approximate policies.
DOI
10.1016/j.ejor.2021.02.026
Cilt
294
