Three Essays on Assortment Planning in Omni-Channel Retail Supply Chains
Date
2023-08
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Abstract
In omni-channel retail systems, comprising an online sales website and brick-and-mortar (physical) stores, a physical store typically faces limited shelf-space capacity, while capacity is not an issue for the online channel. Consequently, a crucial aspect of such retail systems is to choose a subset of products present online for showcasing in the physical store (i.e., assortment planning). In my first research stream, I investigate the omni-channel assortment problem when product returns are allowed. Assortment decisions influence product returns, as showcased products provide information to online shoppers who visit the physical store. Therefore, although product returns can be a factor for profit loss, effective assortment planning can mitigate the returns’ adverse impact and optimize profitability. My results indicate that even with sufficient capacity, showcasing all products in the physical store may not be optimal. Additionally, retailers generally fare better when customers undervalue hidden attribute levels. In my second research stream, I explore a decentralized retail supply chain (RSC) comprising an online channel managed by a manufacturer setting wholesale prices, and an independent retailer managing the physical store and making assortment decisions. As a benchmark, I examine a centralized setting where both channels are under a central authority aiming to maximize overall profit. My findings show fundamental differences in optimal centralized and decentralized assortments, indicating inefficiency in the decentralized approach. I propose scope contracts for coordination, wherein the manufacturer offers discounts on wholesale prices for products with specific attribute levels, incentivizing the retailer to adopt the centralized assortment. The scope contracts ensure both parties' profitability and coordinate the RSC. In the third stream, I suppose that the magnitude of inaccuracy in online assessment of products due to the lack of physical encounter is unknown to the RSC parties, and they make decisions with asymmetric information. I investigate the assortment and wholesale price decisions along with profit regrets. My findings under the decentralized setting indicate that while both parties cannot fare better simultaneously, each party can be advantaged under certain conditions. Under the centralized setting, when supposing accurate online assessments, showcasing an assortment of the highest utility attribute levels possibly minimizes system-wide regret.
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Keywords
Assortment Planning, Omni-Channel Retail, Supply Chain Management, Coordination, Information Asymmetry
Citation
Aslani, A. (2023). Three essays on assortment planning in omni-channel retail supply chains (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.