Journal
INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH
Volume 26, Issue 1, Pages 200-222Publisher
WILEY
DOI: 10.1111/itor.12511
Keywords
newsvendor model; fashion supply chain; response to stockout; omnichannel
Funding
- Japan Society for the Promotion of Science [26350413]
- Grants-in-Aid for Scientific Research [26350413] Funding Source: KAKEN
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In retailing practice, customers may actively respond in one of the following ways after experiencing stockout of a preferred brand: switch to a substitutable brand, switch to another store (where the preferred brand could be available), or delay purchase (backlogging). This paper presents a model of active customer responses to stockout of fashion products. In the single-period model, a retailer maximizes profit by selling two substitutable brands through two different stores. Analytical results and numerical experiments suggest that active response to stockout increase the retailer's profitability due to (a) additional revenue from backlogging and brand and store switching and (b) decrease in optimal order size resulting in lower holding costs. Omnichannel fulfillment offers additional opportunities for retailers to benefit from active responses to stockout.
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