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Optimal inventory policy for fast-moving consumer goods under e-commerce environment

  • * Corresponding author: Zhiyuan Chen

    * Corresponding author: Zhiyuan Chen

This work is partially supported by the Key Program of National Natural Science Foundation of China (NSFC) under grant No.71831007 and the General Programs of NSFC under grant Nos. 71571079, 71871166, and by the Ministry of Education Innovation Century Talents Support Fund (NCET-13-0228) and the Fundamental Research Funds for the Central Universities

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  • Coming up with effective inventory-ordering strategies for fast-moving consumer goods (FMCGs) through online channels has a major characteristic that the goods are promoted frequently. In this paper, a multi-period inventory model is employed wherein each period represents the promotion period, and the inventory level can be adjusted by replenishing or salvaging the inventory at the beginning of each promotion period. A two-threshold ordering policy is proven to be optimal for each promotion period. The benefits of salvaging can be significantly high for decision makers. This study contributes to the literature of inventory management that products are frequently promoted under an e-commerce environment.

    Mathematics Subject Classification: Primary: 90B05, 90B60.

    Citation:

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  • Figure 1.  Policy structure

    Figure 2.  The relationship of the benefit of salvaging $ \Delta $ and model parameters

    Table 1.  SKU of FMCGs from YihaoDian

    Categories 27th Week 28th Week 28th Week 30th Week
    Food and beverage 12,949 12,926 12,799 12,811
    Maternal and infant products 5,936 5,301 5,296 5,291
    Kitchen and cleaning products 5,217 5,231 5,155 5,188
     | Show Table
    DownLoad: CSV

    Table 2.  $[![]!]

    k 1 2 5 10
    x0 = 60 4.5483 2.0535 0.1946 0.0085
    x0 = 80 32.6130 16.7936 2.4027 0.0760
    x0 = 100 84.8075 49.5771 9.9460 0.3748
     | Show Table
    DownLoad: CSV

    Table 3.  Average gap between two thresholds varies with covariance

    $ \tau $ $ T=4 $ $ T=10 $ $ T=20 $ $ T=100 $
    $ \tau= \; 0.99 $ $ 7.50 $ $ 7.60 $ $ 7.05 $ $ 7.34 $
    $ \tau= \; 0.50 $ $ 7.50 $ $ 7.20 $ $ 7.35 $ $ 7.17 $
    $ \tau= \; 0.00 $ $ 7.25 $ $ 7.10 $ $ 6.80 $ $ 7.00 $
    $ \tau=-0.50 $ $ 7.00 $ $ 7.60 $ $ 7.10 $ $ 6.99 $
    $ \tau=-0.99 $ $ 7.50 $ $ 7.70 $ $ 6.80 $ $ 6.97 $
     | Show Table
    DownLoad: CSV
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