American Institute of Mathematical Sciences

Advanced
2012, 2(4): 669-693. doi: 10.3934/naco.2012.2.669

The integrated size and price optimization problem

Miriam Kiessling 1, , Sascha Kurz 2, and  Jörg Rambau 2,

1. 

Universität Bayreuth, 95440 Bayreuth, Germany
2. 

Universität Bayreuth, 95440 Bayreuth, Germany, Germany

Received  December 2011 Revised  October 2012 Published  November 2012

We present the Integrated Size and Price Optimization Problem (ISPO) for a fashion discounter with many branches. Based on a two-stage stochastic programming model with recourse, we develop an exact algorithm and a production-compliant heuristic that produces small optimality gaps. In a field study we show that a distribution of supply over branches and sizes based on ISPO solutions is significantly better than a one-stage optimization of the distribution ignoring the possibility of optimal pricing.
Keywords: fashion discounter, Supply chain, lot-type, stochastic optimization with recourse, mark-down, field study., pre-pack.
Mathematics Subject Classification: Primary: 90B90, Secondary: 90B0.
Citation: Miriam Kiessling, Sascha Kurz, Jörg Rambau. The integrated size and price optimization problem. Numerical Algebra, Control & Optimization, 2012, 2 (4) : 669-693. doi: 10.3934/naco.2012.2.669
References:
[1]

Elodie Adida and Georgia Perakis, A robust optimization approach to dynamic pricing and inventory control with no backorders,, Math. Program., 107 (2006), 97.  doi: 10.1007/s10107-005-0681-5.  Google Scholar

[2]

Elodie Adida and Georgia Perakis, Dynamic pricing and inventory control: Uncertainty and competition,, Oper. Res., 58 (2010), 289.  doi: 10.1287/opre.1090.0718.  Google Scholar

[3]

Dimitris Bertsimas and Sanne de Boer, Dynamic pricing and inventory control for multiple products,, JRPM, 3 (2005), 303.  doi: 10.1057/palgrave.rpm.5170117.  Google Scholar

[4]

John R. Birge and Francois Louveaux, "Introduction To Stochastic Programming,", 2nd ed, (2011).  doi: 10.1007/978-1-4614-0237-4.  Google Scholar

[5]

Gabriel Bitran and Reneé Caldentey, An overview of pricing models for revenue management,, MSOM, 5 (2003), 203.  doi: 10.1287/msom.5.3.203.16031.  Google Scholar

[6]

Lap M. A. Chan, Zuo-Jun M. Shen, David Simchi-Levi and Julie Swann, Coordination of pricing and inventory decisions: A survey and classification,, Handbook of Quantitative Supply Chain Analysis: Modeling in the E-Business Era, (2004), 335.   Google Scholar

[7]

Andreas Christmann and Ingo Steinwart, "Support Vector Machines,", Information Science and Statistics, (2008).   Google Scholar

[8]

Antonio J. Conejo, Enrique Castillo, Roberto Minguez and Raquel Garcia-Bertrand, "Decomposition Techniques in Mathematical Programming: Engineering and Science Applications,", Springer, (2010).   Google Scholar

[9]

Awi Federgruen and Aliza Heching, Combined pricing and inventory control under uncertainty,, Oper. Res., 47 (1999), 454.  doi: 10.1287/opre.47.3.454.  Google Scholar

[10]

David Freedman, Robert Pisani and Roger Purves, "Statistics,", 4th Edition, (2007).   Google Scholar

[11]

Constantin Gaul, Sascha Kurz and Jörg Rambau, On the lot-type design problem,, Optim. Methods Softw., 25 (2010), 217.  doi: 10.1080/10556780902965163.  Google Scholar

[12]

Guillermo Gallego and Garrett van Ryzin, Optimal dynamic pricing of inventories with stochastic demand over finite horizons,, Manage. Sci., 40 (1994), 999.  doi: 10.1287/mnsc.40.8.999.  Google Scholar

[13]

Guillermo Gallego and Garrett van Ryzin, A multiproduct dynamic pricing problem and its applications to network yield management,, Oper. Res., 45 (1997), 24.  doi: 10.1287/opre.45.1.24.  Google Scholar

[14]

Lars Grüne and Jürgen Pannek, "Nonlinear Model Predictive Control,", Communications and Control Engineering, (2011).  doi: 10.1007/978-0-85729-501-9.  Google Scholar

[15]

Miriam Kießling, Sascha Kurz and Jörg Rambau, An exact column-generation approach for the lot-type design problem,, Preprint, (2012).   Google Scholar

[16]

Kaisa M. Miettinen, "Evolutionary Algorithms In Engineering & Computer Science,", John Wiley & Sons LTD, (1999).   Google Scholar

[17]

Alan L. Montgomery, The implementation challenge of pricing decision support systems for retail managers,, Appl. Stoch. Models Bus. Ind., 21 (2005), 367.  doi: 10.1002/asmb.572.  Google Scholar

[18]

Serguei Netessine, Dynamic pricing of inventory/capacity with infrequent price changes,, Eur. J. Oper. Res., 174 (2006), 553.  doi: 10.1016/j.ejor.2004.12.015.  Google Scholar

[19]

Frank Wilcoxon, Individual comparisons by ranking methods,, Biometrics Bulletin, 1 (1945), 80.  doi: 10.2307/3001968.  Google Scholar

[20]

Rui Yin, Yossi Aviv, Amat Pazgal and Christopher S. Tang, Optimal markdown pricing: implications of inventory display formats in the presence of strategic customers,, Manage. Sci., 55 (2009), 1391.  doi: 10.1287/mnsc.1090.1029.  Google Scholar

[21]

Wen Zhao and Yu-Sheng Zheng, Optimal dynamic pricing for perishable assets with nonhomogeneous demand,, Manage. Sci., 46 (2000), 375.  doi: 10.1287/mnsc.46.3.375.12063.  Google Scholar

show all references

References:
[1]

Elodie Adida and Georgia Perakis, A robust optimization approach to dynamic pricing and inventory control with no backorders,, Math. Program., 107 (2006), 97.  doi: 10.1007/s10107-005-0681-5.  Google Scholar

[2]

Elodie Adida and Georgia Perakis, Dynamic pricing and inventory control: Uncertainty and competition,, Oper. Res., 58 (2010), 289.  doi: 10.1287/opre.1090.0718.  Google Scholar

[3]

Dimitris Bertsimas and Sanne de Boer, Dynamic pricing and inventory control for multiple products,, JRPM, 3 (2005), 303.  doi: 10.1057/palgrave.rpm.5170117.  Google Scholar

[4]

John R. Birge and Francois Louveaux, "Introduction To Stochastic Programming,", 2nd ed, (2011).  doi: 10.1007/978-1-4614-0237-4.  Google Scholar

[5]

Gabriel Bitran and Reneé Caldentey, An overview of pricing models for revenue management,, MSOM, 5 (2003), 203.  doi: 10.1287/msom.5.3.203.16031.  Google Scholar

[6]

Lap M. A. Chan, Zuo-Jun M. Shen, David Simchi-Levi and Julie Swann, Coordination of pricing and inventory decisions: A survey and classification,, Handbook of Quantitative Supply Chain Analysis: Modeling in the E-Business Era, (2004), 335.   Google Scholar

[7]

Andreas Christmann and Ingo Steinwart, "Support Vector Machines,", Information Science and Statistics, (2008).   Google Scholar

[8]

Antonio J. Conejo, Enrique Castillo, Roberto Minguez and Raquel Garcia-Bertrand, "Decomposition Techniques in Mathematical Programming: Engineering and Science Applications,", Springer, (2010).   Google Scholar

[9]

Awi Federgruen and Aliza Heching, Combined pricing and inventory control under uncertainty,, Oper. Res., 47 (1999), 454.  doi: 10.1287/opre.47.3.454.  Google Scholar

[10]

David Freedman, Robert Pisani and Roger Purves, "Statistics,", 4th Edition, (2007).   Google Scholar

[11]

Constantin Gaul, Sascha Kurz and Jörg Rambau, On the lot-type design problem,, Optim. Methods Softw., 25 (2010), 217.  doi: 10.1080/10556780902965163.  Google Scholar

[12]

Guillermo Gallego and Garrett van Ryzin, Optimal dynamic pricing of inventories with stochastic demand over finite horizons,, Manage. Sci., 40 (1994), 999.  doi: 10.1287/mnsc.40.8.999.  Google Scholar

[13]

Guillermo Gallego and Garrett van Ryzin, A multiproduct dynamic pricing problem and its applications to network yield management,, Oper. Res., 45 (1997), 24.  doi: 10.1287/opre.45.1.24.  Google Scholar

[14]

Lars Grüne and Jürgen Pannek, "Nonlinear Model Predictive Control,", Communications and Control Engineering, (2011).  doi: 10.1007/978-0-85729-501-9.  Google Scholar

[15]

Miriam Kießling, Sascha Kurz and Jörg Rambau, An exact column-generation approach for the lot-type design problem,, Preprint, (2012).   Google Scholar

[16]

Kaisa M. Miettinen, "Evolutionary Algorithms In Engineering & Computer Science,", John Wiley & Sons LTD, (1999).   Google Scholar

[17]

Alan L. Montgomery, The implementation challenge of pricing decision support systems for retail managers,, Appl. Stoch. Models Bus. Ind., 21 (2005), 367.  doi: 10.1002/asmb.572.  Google Scholar

[18]

Serguei Netessine, Dynamic pricing of inventory/capacity with infrequent price changes,, Eur. J. Oper. Res., 174 (2006), 553.  doi: 10.1016/j.ejor.2004.12.015.  Google Scholar

[19]

Frank Wilcoxon, Individual comparisons by ranking methods,, Biometrics Bulletin, 1 (1945), 80.  doi: 10.2307/3001968.  Google Scholar

[20]

Rui Yin, Yossi Aviv, Amat Pazgal and Christopher S. Tang, Optimal markdown pricing: implications of inventory display formats in the presence of strategic customers,, Manage. Sci., 55 (2009), 1391.  doi: 10.1287/mnsc.1090.1029.  Google Scholar

[21]

Wen Zhao and Yu-Sheng Zheng, Optimal dynamic pricing for perishable assets with nonhomogeneous demand,, Manage. Sci., 46 (2000), 375.  doi: 10.1287/mnsc.46.3.375.12063.  Google Scholar

[1]

Honglin Yang, Jiawu Peng. Coordinating a supply chain with demand information updating. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020181
[2]

Sushil Kumar Dey, Bibhas C. Giri. Coordination of a sustainable reverse supply chain with revenue sharing contract. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020165
[3]

Xi Zhao, Teng Niu. Impacts of horizontal mergers on dual-channel supply chain. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020173
[4]

Wenyan Zhuo, Honglin Yang, Leopoldo Eduardo Cárdenas-Barrón, Hong Wan. Loss-averse supply chain decisions with a capital constrained retailer. Journal of Industrial & Management Optimization, 2021, 17 (2) : 711-732. doi: 10.3934/jimo.2019131
[5]

Zonghong Cao, Jie Min. Selection and impact of decision mode of encroachment and retail service in a dual-channel supply chain. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020167
[6]

Wei Chen, Yongkai Ma, Weihao Hu. Electricity supply chain coordination with carbon abatement technology investment under the benchmarking mechanism. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020175
[7]

Feimin Zhong, Jinxing Xie, Yuwei Shen. Bargaining in a multi-echelon supply chain with power structure: KS solution vs. Nash solution. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2020172
[8]

Hongxia Sun, Yao Wan, Yu Li, Linlin Zhang, Zhen Zhou. Competition in a dual-channel supply chain considering duopolistic retailers with different behaviours. Journal of Industrial & Management Optimization, 2021, 17 (2) : 601-631. doi: 10.3934/jimo.2019125
[9]

Zhimin Li, Tailei Zhang, Xiuqing Li. Threshold dynamics of stochastic models with time delays: A case study for Yunnan, China. Electronic Research Archive, 2021, 29 (1) : 1661-1679. doi: 10.3934/era.2020085
[10]

Xiao-Xu Chen, Peng Xu, Jiao-Jiao Li, Thomas Walker, Guo-Qiang Yang. Decision-making in a retailer-led closed-loop supply chain involving a third-party logistics provider. Journal of Industrial & Management Optimization, 2020  doi: 10.3934/jimo.2021014
[11]

Haodong Yu, Jie Sun. Robust stochastic optimization with convex risk measures: A discretized subgradient scheme. Journal of Industrial & Management Optimization, 2021, 17 (1) : 81-99. doi: 10.3934/jimo.2019100
[12]

Jingrui Sun, Hanxiao Wang. Mean-field stochastic linear-quadratic optimal control problems: Weak closed-loop solvability. Mathematical Control & Related Fields, 2021, 11 (1) : 47-71. doi: 10.3934/mcrf.2020026
[13]

Tien-Yu Lin, Bhaba R. Sarker, Chien-Jui Lin. An optimal setup cost reduction and lot size for economic production quantity model with imperfect quality and quantity discounts. Journal of Industrial & Management Optimization, 2021, 17 (1) : 467-484. doi: 10.3934/jimo.2020043
[14]

Shuyang Dai, Fengru Wang, Jerry Zhijian Yang, Cheng Yuan. A comparative study of atomistic-based stress evaluation. Discrete & Continuous Dynamical Systems - B, 2020  doi: 10.3934/dcdsb.2020322
[15]

Laurent Di Menza, Virginie Joanne-Fabre. An age group model for the study of a population of trees. Discrete & Continuous Dynamical Systems - S, 2020  doi: 10.3934/dcdss.2020464
[16]

Indranil Chowdhury, Gyula Csató, Prosenjit Roy, Firoj Sk. Study of fractional Poincaré inequalities on unbounded domains. Discrete & Continuous Dynamical Systems - A, 2020  doi: 10.3934/dcds.2020394
[17]

Zexuan Liu, Zhiyuan Sun, Jerry Zhijian Yang. A numerical study of superconvergence of the discontinuous Galerkin method by patch reconstruction. Electronic Research Archive, 2020, 28 (4) : 1487-1501. doi: 10.3934/era.2020078
[18]

Rafael López, Óscar Perdomo. Constant-speed ramps for a central force field. Discrete & Continuous Dynamical Systems - A, 2021  doi: 10.3934/dcds.2021003
[19]

Mahir Demir, Suzanne Lenhart. A spatial food chain model for the Black Sea Anchovy, and its optimal fishery. Discrete & Continuous Dynamical Systems - B, 2021, 26 (1) : 155-171. doi: 10.3934/dcdsb.2020373
[20]

Min Xi, Wenyu Sun, Jun Chen. Survey of derivative-free optimization. Numerical Algebra, Control & Optimization, 2020, 10 (4) : 537-555. doi: 10.3934/naco.2020050

 Impact Factor: 

Tools

Metrics

  • PDF downloads (65)
  • HTML views (0)
  • Cited by (1)

Other articles
by authors

[Back to Top]

Copyright © 2021 American Institute of Mathematical Sciences