Assortment planning problems
(LANCS project - Green Logistics)
With Stein W. Wallace
Potentially in cooperation with Hajnalka Vaagen (Molde University College, Norway), and Jason Choi (Hong Kong Polytechnic University).
Traditionally, in the economics and marketing literature, market level product variety has been studied in a context of full information. Market level product variety planning refers to different market share strategies, such as entering new geographical areas or introducing new product groups. It assumes exogenous demand and is driven by the marketing success philosophy of genuinely satisfying heterogeneous customer preferences.
Operational assortment planning ─ which items to be included in a particular product group as well as their inventory levels ─ gains more and more attention as product variety reaches a level that is difficult to deal with, and the environmental consequences are getting increasingly severe. For some product groups only 50% of the produced items ever reach an end customer.
Assortment planning for a given uncertainty in demand, under the assumption of exogenously given customer budgets ─that is, with rather stable aggregated demand, given that the ‘right’ products are offered─, has been studied during the last few years. Substitutable newsvendor models from operations and the mean-variance Markowitz model from finance are combined to investigate the structure of hedging portfolios, and measure the value and risk of different assortment decisions.
There is a need to further extend the existing models to include the market level aspect, by endogenisation of customers’ budget. As such, it is of interest to investigate markets where it is possible to hedge, as well as analyze how to efficiently include ‘hedging against market uncertainty’ in the existing operational assortment planning models. Dynamic pricing strategies also need to be considered.
The research suggested here, hence, aims to further investigate the operational and environmental consequences of global competition, particularly from a product and assortment planning point of view; referring to the products to be developed and included in the portfolio, as well as their inventory levels.
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