Publication Type
Journal Article
Version
acceptedVersion
Publication Date
7-2024
Abstract
Problem definition: We consider an online retailer selling multiple products to different zones over a finite horizon with multiple periods. At the start of the horizon, the retailer orders the products from a single supplier and stores them at multiple warehouses. The retailer determines the products’ order quantities and their storage quantities at each warehouse subject to its capacity constraint. At the end of each period, after random demands in the period are realized, the retailer chooses the retrieval quantities from each warehouse to fulfill the demands of each zone. The objective is to maximize the retailer’s expected profit over the finite horizon. Methodology/results: For the single-zone case, we show that the multi-period problem is equivalent to a single-period problem and the optimal retrieval decisions follow a greedy policy that retrieves products from the lowest-cost warehouse. We design a non-greedy algorithm to find the optimal storage policy, which preserves a nested property: Among all non-empty warehouses, a smaller-index warehouse contains all the products stored in a larger-index warehouse. We also analytically characterize the optimal ordering policy. The multi-zone case is unfortunately intractable analytically and we propose an efficient heuristic to solve it, which involves a non-trivial hybrid of three approximations. This hybrid heuristic outperforms two conventional benchmarks by up to 22.5% and 3.5% in our numerical experiments with various horizon lengths, fulfillment frequencies, warehouse capacities, demand variations, and demand correlations.
Keywords
online seasonal sales, product ordering, inventory allocation, order fulfillment, multiple periods
Discipline
Business | E-Commerce | Operations and Supply Chain Management
Research Areas
Operations Management
Publication
Manufacturing & Service Operations Management
ISSN
1523-4614
Publisher
Institute for Operations Research and Management Sciences
Citation
DENG, Qiyuan; LI, Xiaobo; LIM, Yun Fong; and LIU, Fang.
Optimal policies and heuristics to match supply with demand for online retailing. (2024). Manufacturing & Service Operations Management.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4528
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.