Stockout-Based Substitution and Inventory Planning in Textbook Retailing


    Department of Systems Engineering and Engineering Management

            The Chinese University of Hong Kong


Title     : Stockout-Based Substitution and Inventory Planning in Textbook Retailing

Speaker    : Mr. Joonkyum LEE
Date       : 25 January 2013 (Friday)
Time       : 11:00 a.m. – 12:30 p.m.***Special Time***

Venue      : Room 513

             William M.W. Mong Engineering Building




We develop a utility-based choice model for the Cornell University bookstore to estimate demand and plan inventory for new and used textbooks in the presence of consumer choice and stockout-based substitution. Demand information is censored, the exact time of stockout is not observed, the availability of used books is limited and uncertain, and the short selling season often does not allow for replenishment. We identify key factors that drive demand using data for 26,749 book titles from 2007 to 2011. A simulation experiment calibrated on real data shows that our model generates accurate demand estimates (mean absolute percentage error less than 1%) even when over 90% of the textbooks in the fit sample experience stockout. We implement this model at the bookstore in a controlled pilot experiment. The results demonstrate over 10% increase in profit compared to the existing process. This gain occurs due to better demand estimation and changes in stocking quantities by incorporating stockout-based substitution.


Joonkyum Lee is a PhD candidate in Operations Management at the Samuel Curtis Johnson Graduate School of Management at Cornell University. His research interests include retail operations, supply chain management, and revenue management. His current research focuses on investigating the impact of consumer choice behavior on retail planning problems including inventory planning, demand estimation, and pricing. During his PhD program, Joonkyum taught Managing Operations and he was also a teaching assistant for Supply Chain Management courses. Prior to joining the PhD program, he worked as a manager in the planning department at NCsoft and also worked as a researcher in the global supply chain management department at LG Electronics. He holds an MS degree and a BS degree in Management Engineering from KAIST, Korea.

************************* ALL ARE WELCOME ************************

Host:           Prof. Helen Meng

Tel:             (852) 3943-8316

Enquiries:      Mrs. Monica Wong

                Department of Systems Engineering

                and Engineering Management


Tel.:           (852) 3943-8315


Friday, January 25, 2013 - 03:00 to 04:30