Inventory management for stockout-based substitutable products under centralised and competitive settings
研究了在缺货替代情况下，集中式与竞争式零售商对两种可替代产品的库存决策，推导出最优库存水平，并用在线服装零售商数据验证了消费者替代意愿对库存和利润的显著影响。
Inventory planning in fashion markets is highly challenging, owing to uncertain demand; yet, in making inventory decisions, retailers may be able to capitalise on high substitutability between products. This research develops single-period inventory-management models describing a market with two substitutable products, under stockout-based substitution; i.e. when a customer’s preferred product is out-of-stock, s/he may choose to purchase the substitute. Two settings are considered: centralised (a single retailer who sells both products) and competitive (two retailers, each selling one product). For each setting, we derive closed-form analytical solutions for the inventory levels that maximise expected profit. The model is further enriched with sales data from an online apparel retailer offering substitutable products (a sneaker in different colours), and we analyse the sensitivity of the optimal inventory levels and profits to parameter values. Key findings include the following: (i) Under competitive conditions, both retailers always order positive inventory so as not to lose customers. However, in a single-retailer setting, there are situations in which the retailer orders inventory for only one product. (ii) The optimal inventory levels and corresponding profits are highly sensitive to consumers’ willingness to substitute between products. These findings provide concrete insights that can guide fashion brands’ inventory-management decisions.