ISyE Seminar: “Revenue Management Meets Inventory Management”
Please join us for our last regular seminar of spring semester in person. This seminar will feature Stefanus Jasin from the University of Michigan who will discuss revenue management and inventory management.
3:30 p.m. - Seminar
4:30 p.m. - Reception, coffee and cookies
Stefanus Jasin
Associate Professor of Technology and Operations
University of Michigan
About the seminar
Historically, Revenue Management (RM) and Inventory Management have developed as two separate fields. Although they sometimes share similar research questions (e.g., pricing), they do not always share either the same focus or methodology. In this talk, Professor Jasin will give an overview of several recent works that focus on applying RM techniques to inventory management problems, all of which are motivated by applications in retail. Given enough time, the plan is to divide the talk into two parts. The first part will focus on a joint inventory and pricing problem with one warehouse and multiple stores, in which the retailer needs to make a one-time decision on the amount of inventory to be placed at the warehouse at the beginning of the selling season, followed by periodic joint replenishment and pricing decisions for each store throughout the season.
Jasin and his colleagues study the performance of heuristic controls based on a deterministic/fluid relaxation of the original stochastic problem. Their contributions are three-fold. The researchers first show that simple re-optimization of deterministic/fluid problems may yield a very poor performance by causing a "spiraling down" movement in price trajectory, which in turn yields a "spiraling up" movement in expected lost sales quantity (i.e., lost sales quantity keeps going up as we continue re-optimizing the model). This cautions against a naive use of simple re-optimizations in the joint inventory and pricing setting with lost sales. Second, the researchers propose a better heuristic by combining four ideas: (1) order-up-to control, (2) linear rate adjustment, (3) replenishment batching, and (4) random errors averaging. They show for a particular choice of control parameters that the heuristic is close to optimal when demand is Poisson and the annual market size for each store is large. Third, they show that the benefit of dynamic pricing cannot be recovered by implementing a combination of fixed pricing policy with a smarter (more sophisticated) replenishment policy.
This highlights the limit of pure replenishment only policy, and underscores the importance of dynamic pricing. In the second part of the talk, Jasin will briefly discuss other works along the same theme, including some recent papers that use Lagrangian-based methods and another paper that uses a fluid approximation for a joint pricing and inventory problem with stochastic purchase returns and lost sales. He will discuss some insights on lessons learned when applying RM techniques in inventory-related problems. Overall, these works highlight the potential in adopting RM techniques in solving complex inventory problems.
About the speaker
Stefanus Jasin is an associate professor of Technology and Operations in the Ross School of Business at the University of Michigan, Ann Arbor. He received his master's and Ph.D. degrees in statistics and computational mathematics from Stanford University. Jasin's main research interests are in predictive and prescriptive business analytics, with a focus on developing optimization algorithms for solving complex, large-scale, analytics problems. He has worked on a wide range of applications including revenue management and pricing, assortment optimization, marketing analytic, supply chain and inventory management, e-commerce and omni-channel logistics, crowdsourced on-demand businesses, and online learning and optimization.
His works, in collaboration with several students and co-authors, have been acknowledged by several awards, including 2019 Finalist in POMS-JD Best Paper Competition, 2018 Finalist in MSOM Student Paper Competition, 2018 Finalist in IBM Best Student Award Competition, 2018 Winner of INFORMS Revenue Management and Pricing Section Prize Award, 2017 Winner of INFORMS eBusiness Best Paper Award, and 2017 Second Prize in POMS-HK Student Paper Competition. Jasin is currently serving as an associate editor at several journals: Management Science, Operations Research, Manufacturing and Service Operations Management, Production and Operations Management, and Naval Research Logistics.