Optimal Product Mix Strategy Reconsidered for a Stochastic Fluctuating Economy(<Special English Issue>Optimization and Its Applications)

Abstract

The fashion business has complex demand dynamics. Competitive advantage is severely damaged if a fashion retailer cannot keep up with the fluctuation in fashion demand. Scientific supply chain management is crucial to success. The present study is an attempt to shed new light on this field. That is, the present study develops a supply chain management strategy for fashion retailers by making use of the optimal stopping theory. The analysis reveals that the fashion retailer should introduce new items frequently and increase the variety of items if (1) the fashion retailer is more vulnerable to other fashion retailers' inventions of new items, (2) profit decreases quickly, or (3) the market as a whole is less uncertain.