Quick response in fashion supply chains with retailers having boundedly rational managers

Tsan Ming Choi

Research output: Journal article publicationJournal articleAcademic researchpeer-review

20 Citations (Scopus)

Abstract

International Transactions in Operational Research In fashion retailing, inventory decisions are usually made by a human manager who is not necessarily perfectly rational. In this situation, the inventory decisions made may not always be optimal. At the same time, with advances in technology, fashion retailers have access to the latest market information and can implement the quick response (QR) system that is very helpful to systematically deal with market disruptions. In this paper, we explore the value of QR with the consideration of a boundedly rational human manager in the fashion retailing company. We show that for both cases, with and without QR, the human retail manager's level of bounded rationality significantly hurts the expected profits of the retailer and supply chain, but it does not hurt the manufacturer's expected profit. In addition, for both cases, with and without QR, we indicate how a minimum ordering quantity (MOQ) measure can be imposed by the manufacturer on the retailer, so that the manufacturer can benefit (in terms of expected profit) from the retailer's bounded rationality behavior. We further prove that if the manufacturer sets the MOQ to be the same as the retailer's theoretical optimal ordering quantity, the manufacturer will enjoy a higher profit with 50% chance, if the retailer is boundedly rational.
Original languageEnglish
Pages (from-to)891-905
Number of pages15
JournalInternational Transactions in Operational Research
Volume24
Issue number4
DOIs
Publication statusPublished - 1 Jul 2017

Keywords

  • bounded rationality
  • fashion apparel
  • inventory planning
  • quick response system

ASJC Scopus subject areas

  • Business and International Management
  • Computer Science Applications
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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