Mitigating Spillover in Online Retailing via Replenishment
Online purchases constitute about one-tenth of U.S. retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing’s operations problems;...
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| Muut tekijät: | |
| Aineistotyyppi: | Artikkeli |
| Kieli: | en_US |
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Institute for Operations Research and the Management Sciences (INFORMS)
2017
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| Linkit: | http://hdl.handle.net/1721.1/111138 https://orcid.org/0000-0001-5966-6032 |
| _version_ | 1826189968834297856 |
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| author | Acimovic, Jason Graves, Stephen C |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Acimovic, Jason Graves, Stephen C |
| author_sort | Acimovic, Jason |
| collection | MIT |
| description | Online purchases constitute about one-tenth of U.S. retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing’s operations problems; thus, there is an opportunity to understand and improve these novel supply chains. One key characteristic of the inventory systems for online retailing is demand spillover, whereby a stockout at a fulfillment center (FC) results in demand spilling over to another FC. For this context we examine how to allocate inventory to the FCs under a periodic-review joint-replenishment policy, with an objective to minimize outbound shipping costs for a fixed amount of inventory. We first show how traditional decentralized allocation policies may perform suboptimally and induce dynamics (whiplash) that result in costly spillover. We find that this phenomenon increases with the prevalence of local stockouts and with the level of inventory imbalance. We then describe that inventory imbalance occurs in online retailing because of operational realities and provide evidence based on real data. Finally, we propose a heuristic to allocate inventory accounting for possible spillover during the lead time. We test the heuristic by a simulation and show that it performs better than the status quo policy, is robust to operational realities, and captures over 90% of the possible improvement as compared to a pseudo-optimal policy. |
| first_indexed | 2024-09-23T08:32:56Z |
| format | Article |
| id | mit-1721.1/111138 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:32:56Z |
| publishDate | 2017 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/1111382022-09-30T09:30:51Z Mitigating Spillover in Online Retailing via Replenishment Acimovic, Jason Graves, Stephen C Sloan School of Management Graves, Stephen C Online purchases constitute about one-tenth of U.S. retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing’s operations problems; thus, there is an opportunity to understand and improve these novel supply chains. One key characteristic of the inventory systems for online retailing is demand spillover, whereby a stockout at a fulfillment center (FC) results in demand spilling over to another FC. For this context we examine how to allocate inventory to the FCs under a periodic-review joint-replenishment policy, with an objective to minimize outbound shipping costs for a fixed amount of inventory. We first show how traditional decentralized allocation policies may perform suboptimally and induce dynamics (whiplash) that result in costly spillover. We find that this phenomenon increases with the prevalence of local stockouts and with the level of inventory imbalance. We then describe that inventory imbalance occurs in online retailing because of operational realities and provide evidence based on real data. Finally, we propose a heuristic to allocate inventory accounting for possible spillover during the lead time. We test the heuristic by a simulation and show that it performs better than the status quo policy, is robust to operational realities, and captures over 90% of the possible improvement as compared to a pseudo-optimal policy. 2017-09-06T19:32:03Z 2017-09-06T19:32:03Z 2017-06 2016-09 Article http://purl.org/eprint/type/JournalArticle 1523-4614 1526-5498 http://hdl.handle.net/1721.1/111138 Acimovic, Jason, and Graves, Stephen C. “Mitigating Spillover in Online Retailing via Replenishment.” Manufacturing & Service Operations Management 19, 3 (July 2017): 419–436 © 2017 Institute for Operations Research and the Management Sciences (INFORMS) https://orcid.org/0000-0001-5966-6032 en_US http://dx.doi.org/10.1287/msom.2016.0614 Manufacturing & Service Operations Management Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) Prof. Graves via Shikha Sharma |
| spellingShingle | Acimovic, Jason Graves, Stephen C Mitigating Spillover in Online Retailing via Replenishment |
| title | Mitigating Spillover in Online Retailing via Replenishment |
| title_full | Mitigating Spillover in Online Retailing via Replenishment |
| title_fullStr | Mitigating Spillover in Online Retailing via Replenishment |
| title_full_unstemmed | Mitigating Spillover in Online Retailing via Replenishment |
| title_short | Mitigating Spillover in Online Retailing via Replenishment |
| title_sort | mitigating spillover in online retailing via replenishment |
| url | http://hdl.handle.net/1721.1/111138 https://orcid.org/0000-0001-5966-6032 |
| work_keys_str_mv | AT acimovicjason mitigatingspilloverinonlineretailingviareplenishment AT gravesstephenc mitigatingspilloverinonlineretailingviareplenishment |