Download or read book Joint Inventory and Fulfillment Decisions for Omnichannel Retail Networks written by Aravind Govindarajan and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: With e-commerce growing at a rapid pace compared to traditional retail, many brick-and-mortar firms are supporting their online growth through an integrated omnichannel approach. Such integration can lead to reduction in cost that can be achieved through efficient inventory management. A retailer with a network of physical stores and fulfillment centers facing two demands (online and in-store) has to make important, interlinked decisions - how much inventory to keep at each location and where to fulfill each online order from, as online demand can be fulfilled from any location. We consider order-up-to policies for a general multi-period model with multiple locations and zero lead time, and online orders fulfilled multiple times in each period. We first focus on the case where fulfillment decisions are made at the end of each period, which allows separate focus on the inventory decision. We develop a simple, scalable heuristic for the multi-location problem based on analysis from the two-store case, and prove its asymptotic near-optimality for large number of omnichannel stores under certain conditions. We extend this to the case where fulfillment is done multiple times within a period and combine it with a simple, threshold-based fulfillment policy which reserves inventory at stores for future in-store demand. With the help of a realistic numerical study based on a fictitious retail network embedded in mainland USA, we show that the combined heuristic outperforms a myopic, decentralized planning strategy under a variety of problem parameters, especially when there is an adequate mix of online and in-store demands. Extensions to positive lead times are discussed.

Download or read book Telemobility Technical Report written by Hongyuan Yang and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Operations in an Omnichannel World written by Santiago Gallino and published by Springer Nature. This book was released on 2019-10-15 with total page 353 pages. Available in PDF, EPUB and Kindle. Book excerpt: The world of retailing has changed dramatically in the past decade. Sales originating at online channels have been steadily increasing, and even for sales transacted at brick-and-mortar channels, a much larger fraction of sales is affected by online channels in different touch points during the customer journey. Shopper behavior and expectations have been evolving along with the growth of digital channels, challenging retailers to redesign their fulfillment and execution processes, to better serve their customers. This edited book examines the challenges and opportunities arising from the shift towards omni- channel retail. We examine these issues through the lenses of operations management, emphasizing the supply chain transformations associated with fulfilling an omni-channel demand. The book is divided into three parts. In the first part, “Omni-channel business models”, we present four studies that explore how retailers are adjusting their fundamental business models to the new omni-channel landscape. The second part, “Data-driven decisions in an omni-channel world”, includes five chapters that study the evolving data opportunities enabled by omni-channel retail and present specific examples of data-driven analyses. Finally, in the third part, “Case studies in Omni-channel retailing”, we include four studies that provide a deep dive into how specific industries, companies and markets are navigating the omni-channel world. Ultimately, this book introduces the reader to the fundamentals of operations in an omni-channel context and highlights the different innovative research ideas on the topic using a variety of methodologies.

Download or read book Inventory Fulfillment Strategies for an Omni Channel Retailer written by Elnaz Jalilipour Alishah and published by . This book was released on 2015 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study the fulfillment strategies of an omni-channel retailer that would like to leverage its established offline retail channel infrastructure to help its online sales. We consider a single newsvendor-type product that is sold in both online and offline channels to non-overlapping markets with independent Poisson demand. The offline store can fulfill online demand at an additional handling and fulfillment cost, k, but not vice versa. The retailer makes decisions at three different levels: 1) at the strategic level the retailer must establish a fulfillment structure between the two channels in terms of where to stock inventory in the two channels, 2) at the tactical level, the retailer decides how much inventory to have for each channel before the season starts, 3) at the operational level throughout the season, as demand unfolds and inventory depletes, the retailer makes rationing decision about whether to use offline inventory to fill online order at any moment. We build separate and integrated models to study these decisions, and find that the optimal rationing decision has a threshold-based structure that depends critically on k and the mix of demand between the two channels. Two simple rationing heuristics are proposed and shown to be effective. Furthermore, integrating the rationing policy into higher-level decisions, we show that it can have significant impact on the retailer's stocking and fulfillment structure decisions. As a result, we propose an integrated policy, where the retailer builds separate inventory stocks for each channel but can use the offline inventory to back up online sales, subject to a rationing heuristic, is proved to be simple, effective, and robust. We discuss the various practical implications of our findings.

Download or read book Channel Fulfillment Characteristics Retail Network Structure and Buy online shipfrom store Performance written by Daniel Fritzen Taylor and published by . This book was released on 2018 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt: Buy-online-ship-from-store (BOSS) is a relatively new and increasingly popular omnichannel fulfillment strategy for retailers. Shipping from stores allows retailers the capability to offer in-store inventory to online customers. The combined inventory available in stores and their locations closer to the customer make them attractive for online direct-to-consumer order fulfillment. In three essays, we identify statistical-economies-of-scale benefits from this pooling technique across asymmetrical retail channels. Working with a retailer, we detect ship-from-store contributed store stockouts. We also examine consumer behavior in response to stockouts according to the channel of intended purchase. In the first study we use chance constrained analytical models and Monte Carlo simulation to demonstrate the distinctly different inventory pooling behavior caused network-wide when implementing buy-online-ship-from-store. The asymmetrical availability of inventory to online customers versus in-store customers allows for unique to omnichannel captive inventories within stores. When online demand is strong enough, all safety stocks can be redirected to online customers. Otherwise, safety stocks can remain stagnant in the stores. In our second study, we partner with an apparel retailer and distinguish the counter-phenomenon observed in essay one. We observe stores unevenly stocking out when contributing to online demand fulfillment. Using panel data from the 2016 holiday season, we utilize store-based fixed-effects models to show that assigning stores to fulfill local online demand where both channels have strong sales leads to uneven store stockouts across the network. By utilizing consumer experiments, our third study demonstrates that in-store customers are more likely to remain with the retailer and substitute for out-of-stock products. Online customers are more likely to leave the retailer to seek their exact desired product elsewhere. Mitigating strategies for the retailer are additionally examined. We recognize that BOSS can make more inventory available for online customers. Each essay expands the theoretical understanding of omnichannel fulfillment management. Buy-online-ship-from-store is currently being applied by many retailers. Our research is directly applicable in practice. We propose paths to expand the work we have contributed. This dissertation expands our understanding of inventory and stockout behavior regarding omnichannel fulfillment and its impact on retailers and consumers.

Download or read book Order Fulfillment Algorithms for Online Retail written by Pin-Yi Chen and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study an order fulfillment problem in an online-retail setting where the retailer's fulfillment system includes warehouses that hold inventory (fulfillment centers), and a transportation network composed of node facilities and transportation arcs. To minimize the total transportation costs for order fulfillment, the online retailer should plan its transportation capacities properly in advance and execute according to the transportation plan by making smart fulfillment decisions. To fulfill a customer order, the online retailer must decide from where to source the inventory needed for the order, as well as how to route the order to the customer to satisfy a delivery time commitment. In this research we focus on the latter decision, namely choosing the route for each order. The online retailer has full control of its transportation system in both planning and execution; in addition, the online retailer can rely on third party carriers to transport some of its orders. We design an order fulfillment algorithm that makes immediate routing decisions for incoming orders. To determine the route to assign to an order, we compare the costs of all feasible routes. For routes that use retailer-controlled resources, we need to account for the opportunity costs associated with these resources. We propose to do this with the dual values from a transportation quadratic program, which tries to account for the uncertainty of the network flows to estimate the opportunity costs of depleting resources in the transportation network. The dual values are updated periodically with the most updated system states that include resource capacities and demand forecasts. We numerically test our algorithm on a realistic network with inputs inspired by the actual data from our industry collaborator. We compare our algorithm with several benchmark algorithms, including a LP-based algorithm that mimics the algorithm in the retailer's current operating system. The experiments show a 50% reduction in the mean percentage difference in shipping cost from the hindsight solution as compared to the LP-based algorithm. In addition to the fulfillment algorithm, we formulate a capacity planning problem that determines the optimal level of transportation resources in the network for a given demand forecast. When the demand deviates from the planned capacity by a lot, adding or removing planned resources becomes a crucial cost-saving mechanism. Motivated by this, we propose ad hoc truck controllers that make online capacity modification decisions and test it with small examples.

Download or read book Omni Channel Retailing and Its Requirements in the Supply Chain written by Carina Sauter and published by GRIN Verlag. This book was released on 2015-12-30 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2014 in the subject Business economics - Supply, Production, Logistics, grade: 1,1, IE Business School, Madrid, course: Production & Supply Chain Management, language: English, abstract: This thesis is a description of the state of the art of the Omnichannel retail strategy with a focus on the changes necessary in supply chain design. Its purpose is to provide a comprehensive overview on omnichannel retailing that can serve as a first source of information for companies thinking about adapting this strategy. There is no single external source that combines the description of omnichannel retailing with details of how to implement this strategy yet, so this thesis makes it significantly easier for retailers to familiarize with the topic and get impulses for further research. The introduction shows the developments that led to the strategic move, which eases understanding the concept and its purpose. The thesis finds that technological innovations, changing shopping behavior, increasing expectations, and intensifying online competition were the major drivers affecting this shift. It continues to describe the common omnichannel initiatives before it gets into more detail on what supply chain and logistics changes are necessary to support them. First, it shows that the application of RFID technology and IT platforms creates an end-to-end transparent supply chain, which delivers the core capability to pursue this strategy: complete inventory visibility. Second, the solutions to improve fulfillment speed are presented. Both upgrades in order processing inside the warehouse and innovative last mile solutions are discussed in detail. Describing the benefits of omnichannel retailing, the paper shows that it perfectly meets the requirements of today’s retailers. Not only does the strategy improve profitability and productivity, it also helps them meet expectations, learn more about their customers and use this knowledge to sustainably compete in the market. It also finds that there are significant challenges to overcome before reaping these benefits. Large investments and added complexity need to be faced during setup and a non-aligned organization and the inability to engage employees are major problems during execution. As the retail environment evolves at a rapid pace, the paper finally presents strategies for companies that have fully developed omnichannel capabilities. These ensure that retailers can also compete once omnichannel is the new normal.

Download or read book Optimal Fulfillment Strategies in an Omnichannel Retail Supply Chain written by and published by . This book was released on 2020 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the development of digital technologies, more and more brick-and-mortar stores are starting to offer the online channel to sell their products. For example, Walmart and Whole Foods are selling fresh groceries from both their websites and store locations. As a result, such omni-channel retailers need to serve both online and in-store demand. To do that, the retailer may choose to fulfill online demand from a centralized distribution center (DC), or by utilizing inventory of stores. In this thesis, I explore the optimal fulfillment strategies of an omni-channel retailer. Firstly, consider customers' behavior when they face online and in-store purchase options. Using utility theory, model customers' behavior in preferring either channel. Secondly, I explore the impacts of retailers' fulfillment choices on its inventory cost, shipping and delivery cost, as well as overall profitability. This thesis identifies conditions under which either fulfillment strategy (i.e., from DC or stores) is optimal. And find that the optimal fulfillment strategy is dependent on the total number of stores, unit inventory cost at the stores and DC, unit delivery cost, product prices and number of stores. Case studies based on Manhattan and Los Angeles are provided to further investigate the retailer's fulfillment decision as well as the impacts of its pricing decision, and geographic and cost characteristics. For Manhattan, for both exogenous and endogenous price cases, the regions where store fulfillment are optimal first decrease and then increases as the total number of stores increases. For Los Angeles, the region where store fulfillment is optimal always increases with the total number of stores.

Download or read book Omni Channel Retail and the Supply Chain written by Paul Myerson and published by CRC Press. This book was released on 2020-11-25 with total page 283 pages. Available in PDF, EPUB and Kindle. Book excerpt: Omni-Channel Retail and the Supply Chain The days of going to the local department store to buy a television, view the options available, and make a purchase now seem "quaint." The emergence of the internet, smartphones, social media, and other technologies has opened a world of new options for consumers (and businesses) to review, research, and buy online with an ever-increasing array of delivery options. The emergence of e-commerce has resulted in what is commonly known today as "omni-channel" marketing, in which customers engage with companies in a variety of ways, including in a physical store or online via websites and mobile apps. This process puts the supply chain "front and center," as consumers are increasingly demanding and browsing, buying, and returning goods through various channels, not just the traditional "brick and mortar" way. To accomplish this with high levels of service while remaining profitable requires real-time visibility of inventory across the supply chain and a single view of consumers as they continuously move from one channel to another. While this is a boon to consumers, it has made the already complex global supply chain even more challenging to manage. On top of that, the 2020 Covid19 pandemic has accelerated this omni-channel retail trend, as consumers need even more ways to order and additional options for last-mile delivery, such as curbside pickup. Covid19 has exposed a lack of flexibility and readiness, resulting in shortages of everything from toilet paper and meats to personal protective equipment (PPE) and ventilators. It has been a real-life example of the "bullwhip effect," where variability at the consumer end of the supply chain results in increased variability as one goes upstream towards distributors, manufacturers, and suppliers. This results in shortages, misallocations, and increased costs. No longer can a manufacturer, distributor, or retailer of consumer products just "fill the pipeline" and wait for orders to come in. Now, they must anticipate various purchases and delivery items, while at the same time minimizing costs. To do this is no easy task, requiring a Lean, agile, and responsive supply chain. Until now, there was no existing "playbook" for organizations to navigate their way through this new world. This book describes the impact of omni-channel marketing on the supply chain and logistics functions, and is intended to help management meet the needs of not only today’s ever-changing world but to anticipate what may be required in the future to achieve superior customer service, profitability, and a competitive advantage.

Download or read book Retail Supply Chain Management written by Narendra Agrawal and published by Springer. This book was released on 2015-04-20 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt: This new edition focuses on three crucial areas of retail supply chain management: (1) empirical studies of retail supply chain practices, (2) assortment and inventory planning and (3) integrating price optimization into retail supply chain decisions. The book has been fully updated, expanding on the distinguishing features of the original, while offering three new chapters on recent topics which reflect areas of great interest and relevance to the academic and professional communities alike - inventory management in the presence of data inaccuracies, retail workforce management, and fast fashion retail strategies. The innovations, lessons for practice, and new technological solutions for managing retail supply chains are important not just in retailing, but offer crucial insights and strategies for the ultimate effective management of supply chains in other industries as well. The retail industry has emerged as a fascinating choice for researchers in the field of supply chain management. It presents a vast array of stimulating challenges that have long provided the context of much of the research in the area of operations research and inventory management. However, in recent years, advances in computing capabilities and information technologies, hyper-competition in the retail industry, emergence of multiple retail formats and distribution channels, an ever increasing trend towards a globally dispersed retail network, and a better understanding of the importance of collaboration in the extended supply chain have led to a surge in academic research on topics in retail supply chain management. Many supply chain innovations (e.g., vendor managed inventory) were first conceived and successfully validated in this industry, and have since been adopted in others. Conversely, many retailers have been quick to adopt cutting edge practices that first originated in other industries. Retail Supply Chain Management: Quantitative Models and Empirical Studies, 2nd Ed. is an attempt to summarize the state of the art in this research, as well as offer a perspective on what new applications may lie ahead.

Download or read book Challenges for the order fulfillment process of online retailers due to the COVID 19 pandemic written by Paul Heck and published by GRIN Verlag. This book was released on 2020-08-26 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2020 in the subject Business economics - Supply, Production, Logistics, grade: 2,0, Cologne Business School Köln, language: English, abstract: This paper aims to identify the challenges for the fulfillment process of online retailers due to the COVID 19 pandemic. No other topic dominates the current public perception more than COVID-19. National, federal and local authorities require their citizens to stay at home and avoid social contact during the pandemic. The result is an e-commerce boom, with online retail orders increasing for example in the US by 146% in comparison to the previous year. However, customers experience that many well-known benefits, such as a seemingly endless selection of affordable products or shipping in two days, are no longer guaranteed. The reason lies in the process of order fulfillment. This process encompasses all the activities a company undertakes from the moment an order is received until the items are delivered, including all customer services. It comprises back-office activities such as packaging, delivery, accounting, inventory management, and shipping as well as front-office activities such as advertising and order acceptance.

Download or read book Making Better Fulfillment Decisions on the Fly in an Online Retail Environment written by Jason Acimovic and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Relative to brick-and-mortar retailers, online retailers have the potential to offer more options to their customers, with respect to both inventory as well as delivery times. To do this entails the management of a distribution network with more decision options than a traditional retailer. The online retailer, not the customer, decides from where items will ship, by what shipping method, and how or whether multiple-item orders will be broken up into multiple shipments. What is the best way to fulfill each customer's order to minimize average outbound shipping cost? We partner with an online retailer to examine this question. We develop a heuristic that makes fulfillment decisions by minimizing the immediate outbound shipping cost plus an estimate of future expected outbound shipping costs. These estimates are derived from the dual values of a transportation linear program (LP). In our experiments on industry data, we capture 36% of the opportunity gap assuming clairvoyance, leading to reductions in outbound shipping costs on the order of 1%. These cost savings are achieved without any deterioration in customer service levels or any increase in holding costs. The transportation LP also serves as the basis for a metric that provides information on the quality of the inventory position. Based on initial successful piloting, our industrial partner has implemented the metric, as well as a version of the heuristic that it is applying to every fulfillment decision for each of its SKUs in North America.

Download or read book Inventory Positioning in Modern Retail written by Andreea Georgescu (S.M.) and published by . This book was released on 2021 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern retail has been significantly affected by the surge in online platforms and product options. Customers have comfortably settled into an omni-channel model, in which they buy different products through different channels. While customers expect a seamless process in getting the products they are looking for, they are also more influenced by the selection offered when unsure of what to buy. For retailers, the transition to omnichannel means more complex problems of inventory positioning and demand fulfillment, but also an opportunity to influence their customers through the assortments they offer, especially online. In this thesis, we study two main challenges related to inventory positioning in omni-channel and provide new models and algorithms. First, we study the problem of choice modeling and assortment optimization. Choice models aim to capture customer preferences across products and have been extensively studied. Whereas numerous models have been proposed, few are tractable, and many have been shown to be limited in capturing customer preferences, due to their underlying assumptions on consumer behavior. In the first part of this thesis, we introduce a new class of models, which we call synergistic, and show both theoretically and empirically, that these models dominate all existing ones in capturing consumer preferences. We show the associated optimization problems for the synergistic models are NP-hard, but provide IP-based algorithms, which are reasonably tractable in practice. Finally, we show that these models can be represented as ReLU activated neural networks. Therefore, state of the art methods in the neural networks field can be leveraged to efficiently estimate these models and optimize over them, to inform assortment optimization decisions. In the second part of the thesis, we focus on inventory planning for a physical retailer, considering the complex dynamics in the store involving the backroom, and the need to minimize its use. The question is motivated by our collaborator, a large US retail chain, striving to leverage their store assets as shipping hubs. We present a case study of working with real data to understand the complexities of this question and identify steps a retailer can take to become leaner.

Download or read book Joint Product Framing Display Ranking Pricing and Order Fulfillment Under the MNL Model for E Commerce Retailers written by Yanzhe (Murray) Lei and published by . This book was released on 2020 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Problem definition: We study a joint product framing and order fulfillment problem with both inventory and cardinality constraints faced by an e-commerce retailer. There is a finite selling horizon and no replenishment opportunity. In each period, the retailer needs to decide how to “frame” (i.e., display, rank, price) each product on her website as well as how to fulfill a new demand. Academic/Practical Relevance: E-commerce retail is known to suffer from thin profit margins. Using the data from a major U.S. retailer, we show that jointly planning product framing and order fulfillment can have a significant impact on online retailers' profitability. This is a technically challenging problem as it involves both inventory and cardinality constraints. In this paper, we make progress toward resolving this challenge. Methodology: We use techniques such as randomized algorithms and graph-based algorithms to provide a tractable solution heuristic which we analyze through asymptotic analysis. Results: Our proposed randomized heuristic policy is based on the solution of a deterministic approximation to the stochastic control problem. The key challenge is in constructing a randomization scheme that is easy to implement and that guarantees the resulting policy is asymptotically optimal. We propose a novel two-step randomization scheme based on the idea of matrix decomposition and a re-scaling argument. Managerial Implications: Using the data of a U.S. retailer, we show that when inventory across the network is imbalanced, the widespread practice of planning product framing without considering its impact on fulfillment can result in high shipping costs, regardless of the fulfillment policy used. Our proposed policy significantly reduces shipping costs by using product framing to manage demand so that it occurs close to the location of the inventory. Our numerical tests show that the proposed heuristic is very close to optimal, can be applied to large-scale problems in practice, and highlights the value of jointly optimizing product framing and order fulfillment decisions.

Download or read book Distribution System Design for Omnichannel Retailing written by Jia Guo and published by . This book was released on 2019 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: Omnichannel retailing - serving customers via a combination of physical stores and web-based stores- offers new opportunities and forces traditional retailers to rethink their supply chain design, operational efficiency, revenue/cost streams, and operations/marketing interface. While omnichannel supply chain management has received some attention recently, the role of cross-channel fulfillment, the layout of the omnichannel retail supply chain, and revenue management considering customer channel choice behavior have not been widely studied. This dissertation investigates these three streams in omnichannel supply chain design. In the cross-channel fulfillment stream, we study the optimal supply chain design for a dual-channel retailer that combines the operations of both channels in an omnichannel environment considering demand segmentation, cost structure, and more importantly, the execution ability of the firm. We formulate this problem as a two-stage stochastic programming model and use first-order optimality conditions to study the optimal inventory replenishment decisions and omnichannel strategy decisions under perfect and imperfect demand information. For the second chapter, we extend the dual-channel setting from a single store to N retail stores. We study the transshipment problem based on a two-store case by reformulating the problem into a large scale mixed-integer linear programming model. The third chapter addresses the revenue management stream by focuses on the interface between the retailer's operations and customer's demand. Specifically, this chapter explores the right role for a physical store in an omnichannel environment for an online-first retailer. The main result relates to the trade-off between the increased profits from the newly acquired demand (from the new channel) and the increased fulfillment and operations costs from cannibalized demand.

Download or read book Essays on Omnichannel Sale written by Elnaz Jalilipour Alishah and published by . This book was released on 2016 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, we study three problems related to omnichannel sale. In the first two chapters, we study omnichannel fulfillment where a retailer can use either the online or the offline channel to back up the other one by fulfilling its demand, because of stockout or low inventory availability. In the last chapter, we study an incentive problem where sales agents compete for a common customer base. This problem is loosely related to similar problems in omnichannel sales – when an online order is filled by an offline store, or vice versa, how should sales credit be shared? In the first chapter, we study store fulfillment strategy of an omnichannel retailer that would like to leverage its established offline retail channel infrastructure to capture online sales after stockout. We consider a single newsvendor-type product that is sold in both online and offline channels to non-overlapping markets with independent Poisson demand. The offline store can fulfill online demand at an additional handling and fulfillment cost, k, but not vice versa. We characterize the optimal rationing policy which determines whether online demand should be fulfilled or not given the remaining time and inventory. Due to the challenges of implementing the optimal policy, we further propose two simple and effective heuristics. We also show that integrating the rationing policy into retailer’s higher-level inventory stocking and supply chain design decisions can have a significant impact on the retailer’s inventory level and profitability. As a result, we propose an integrated policy, where the retailer builds separate inventory stocks for each channel but can use the offline inventory to back up online sales, subject to a rationing heuristic. In the second chapter, we study discounted home delivery strategy of an omnichannel retailer that would like to leverage its online channel to help with offline sales when offline store has limited inventory. We consider a single newsvendor-type product that is sold in both online and offline channels to non-overlapping markets with independent Poisson demand. Store has option to offer customers discount d to incentivize them to accept home delivery of item rather than taking an inventory unit from the store. We assume customers are heterogeneous in their discount sensitivity, ranging from price sensitive to leadtime sensitive. We characterize the optimal dynamic discounting policy which determines at any point in season whether the offline store should offer discount or not, and if yes, the optimal discount level. Again, due to the challenges of implementing the optimal policy, we propose two simple and effective heuristics. We conduct an extensive numerical study and find that retailers can considerably benefit from discounted home delivery policy. In the last chapter, we study sales agent’s competition for a common customer base when sales agents are heavily paid by commission. We assume agents can affect customers perceived service quality through their service time. We build a simple model that captures agents time and quality trade off while competing for a common customer base. We assume that the agent’s service time can increase sales probability, but the agents incur cost for their effort. We show that agent’s speed up in the decentralized setting, in comparison to the central solution, which results in lower expected sale for the system. We suggest financial, operational, and informational tools that can align agent’s incentive with that of the service provider’s.

Download or read book Effective Online Order Acceptance Policies for Omni Channel Fulfillment written by Su Jia and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Problem Definition: Omni-channel retailing has led to the use of traditional stores as fulfillment centers for online orders. Omni-channel fulfillment problems have two components: (1) accepting a certain number of on-line orders prior to seeing store demands, and (2) satisfying (or filling) some of these accepted on-line demands as efficiently as possible with any leftover inventory after store demands have been met. Hence, there is a fundamental trade-off between store cancellations of accepted online orders and potentially increased profits due to more acceptances of online orders. We study this joint problem of online order acceptance and fulfillment (including cancellations) to minimize total costs, including shipping charges and cancellation penalties in single-period and limited multi-period settings.Academic/Practical Relevance: Despite the growing importance of omni-channel fulfillment via online orders, our work provides the first study incorporating cancellation penalties along with fulfillment costs. Methodology: We build a two-stage stochastic model. In the first stage, the retailer sets a policy specifying which online orders it will accept. The second stage represents the process of fulfilling online orders once the uncertain quantities of in-store purchases are revealed. We analyze two classes of threshold policies that accept online orders as long as the inventories are above a global threshold, or a local threshold per region. Results: Total costs are unimodal as a function of the global threshold, and unimodal as a function of a single local threshold holding all other local thresholds at constant values, motivating a gradient search algorithm. Reformulating as an appropriate linear program with network flow structure, we estimate the derivative (using infinitesimal perturbation analysis) of the total cost as a function of the thresholds. We validate the performance of the threshold policies empirically using data from a high-end North American retailer. Our two-store experiments demonstrate that Local Thresholds perform better than Global Thresholds in a wide variety of settings. Conversely, in a narrow region with negatively correlated online demand between locations and very low shipping costs, Global Threshold outperforms Local Thresholds. A hybrid policy only marginally improves on the better of the two. In multiple periods, we study one- and two-location models and provide insights into effective solution methods for the general case.Managerial Implications: Our methods give an effective way to manage fulfillment costs for online orders, demonstrating a significant reduction compared to policies that treat each store separately, reflecting the significant advantage of incorporating shipping in computing thresholds.