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Session Chair: Can Zhang Session Chair: Yangfang Helen Zhou
Location:Forum 7
Presentations
Estimating Stockout Costs and Optimal Stockout Rates to improve the Management of Ugly Produce Inventory
Stanley Lim1, Elliot Rabinovich2, Sanghak Lee2, Sungho Park3
1Michigan State University, United States of America; 2Arizona State University, United States of America; 3Seoul National University, South Korea
Discussant: Victor Martínez de Albéniz (IESE Business School)
Efficiently managing inventories requires an accurate estimation of stockout costs. This estimation is complicated by challenges in determining how to compensate consumers monetarily so that they will maintain the same level of utility had stockouts not occurred. This paper presents an analysis of these compensation costs, as applied to the design of optimal stockout rates by an online retailer selling to consumers aesthetically substandard fruits and vegetables rejected by mainstream grocers.
On the Management of Premade Foods
Jae-Hyuck Park1, Dan A. Iancu2, Erica Plambeck2
1The HKUST Business School, Hong Kong S.A.R. (China); 2Stanford University
Discussant: Dorothee Honhon (University of Texas at Dallas)
We examine a grocery retailer's management of premade food. The retailer's objective is to maximize the direct profit plus (weighted) customer welfare generated the food product. The retailer chooses: the shelf life, FIFO vs. LIFO issuance, and whether or not to time-stamp items. Our first main result is that LIFO issuance is universally optimal. Second, the retailer time-stamps items if the disposal cost for unsold items is low or the retailer puts sufficient weight on customer welfare.
