Journal article

Category Inventory Planning With Service Level Requirements and Dynamic Substitutions

Yalcin Akcay, Yunke Li, Harihara Prasad Natarajan

Production and Operations Management | Wiley | Published : 2020

Abstract

We study a single‐period inventory planning problem for a category of substitutable products. This is an important practical problem facing category managers who have to maintain high service levels for constantly expanding product catalogs. We formulate the problem as a stochastic optimization model that minimizes the total stocking cost subject to service level requirements, which consist of product‐specific and category‐wide targets for inventory availability (ready rates) through the selling season. Our model accounts for stochastic customer arrivals, captures stockout‐based substitutions, and determines initial stocking quantities jointly for all products. Recognizing the challenges tha..

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University of Melbourne Researchers

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Funding Acknowledgements

The authors would like to acknowledge the review team for their insightful and constructive feedback that enhanced the study. Harihara P. Natarajan would also like to acknowledge the support of the Center for International Business Education and Research that supported this work with a travel grant.