Omni-channel Retailing | SMU Research

Associate Professor Lim Yun Fong was enticed by a paradoxical observation that despite a strong growth of online and omni-channel retailing in Southeast Asia, many companies in this industry do not make a high profit. He highlights the logistical challenges of the complex operations behind online and omni-channel shopping. Associate Prof Lim also describes an exciting technology that he develops with his colleagues at SMU to help retailers integrate their replenishment, allocation, and fulfilment decisions.

Lim Yun Fong is Associate Professor of Operations Management and MPA Research Fellow at the Lee Kong Chian School of Business, Singapore Management University (SMU). He is also Academic Director of the MSc in Management (MiM) Program at SMU. He has been a Chang Jiang Chair Professor, a Lee Kong Chian Fellow, and an NOL Fellow. Yun Fong’s research has appeared in Operations Research, Management Science, Manufacturing and Service Operations Management, and Production and Operations Management. He has delivered keynote and plenary speeches in several international conferences. In addition, his work has received funding by MOE, A*STAR, and NNSF, and media coverage by The Business Times, CNA938, and Channel 8. His current research interests include e-commerce and marketplace analytics, inventory management, warehousing and fulfillment, sustainable urban logistics, and flexible workforce and resource management. Yun Fong serves as Associate Editor for Naval Research Logistics and Guest Editor for Production and Operations Management.

Yun Fong is a recipient of the SMU Teaching Excellence Innovative Teacher Award. He teaches both undergraduate and postgraduate courses in Operations Management. He has provided consulting service and executive development to corporations such as Alibaba, Maersk, McMaster-Carr Company, Resorts World Sentosa, Schneider Electrics, Temasek Holdings, and Zalora. Yun Fong obtained both his PhD and MSc degrees in Industrial and Systems Engineering from the Georgia Institute of Technology.

Faculty profile: https://business.smu.edu.sg/faculty/p...

About the Paper
Integrating Anticipative Replenishment-Allocation with Reactive Fulfillment for Online Retailing Using Robust Optimization

Yun Fong LIM, Singapore Management University
Song JIU, Southwest Jiaotong University
Marcus ANG, Singapore Management University

Abstract
Problem definition: In each period of a planning horizon, an online retailer decides on how much to replenish each product and how to allocate its inventory to fulfillment centers (FCs) before demand is known. After the demand in the period is realized, the retailer decides on which FCs to fulfill it. It is crucial to optimize the replenishment, allocation, and fulfillment decisions jointly such that the expected total operating cost is minimized. The problem is challenging because the replenishment-allocation is done in an anticipative manner under a “push” strategy, but the fulfillment is executed in a reactive way under a “pull” strategy. We propose a multi-period stochastic optimization model to delicately integrate the anticipative replenishment-allocation decisions with the reactive fulfillment decisions such that they are determined seamlessly as the demands are realized over time.
Academic/practical relevance: The aggressive expansion in e-commerce sales significantly escalates online retailers’ operating costs. Our methodology helps boost their competency in this cut-throat industry.

Methodology: We develop a two-phase approach based on robust optimization to solve the problem. The first phase decides whether the products should be replenished in each period (binary decisions). We fix these binary decisions in the second phase, where we determine the replenishment, allocation, and fulfillment quantities.

Results: Numerical experiments suggest that our approach outperforms existing methods from the literature in solution quality and computational time, and performs within 7% of a benchmark with perfect information. A study using real data from a major fashion online retailer in Asia suggests that the two-phase approach can potentially reduce the retailer’s cumulative cost significantly.
Managerial implications: By decoupling the binary decisions from the continuous decisions, our methodology can solve large problem instances (up to 1,200 products). The integration, robustness, and adaptability of the decisions under our approach create significant values.

Citation
Lim YF, Jiu S, Ang M (2020) Integrating anticipative replenishment-allocation with reactive fulfillment for online retailing using robust optimization. Manufacturing and Service Operations Management, forthcoming.

This paper is available at:
https://ink.library.smu.edu.sg/cgi/vi...

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