The Value of Information in Quick Response Supply Chains: An Assortment Planning View

Abstract

Many see timely accurate information availability as the key ofsuccessful customer-behaviour-reactive, wait-and-see planning in agileenvironments. Because of the extensive use of lean retailing, thesequick response (QR) strategies require substantially reduced lead timesacross the supply chain, with the competitive advantage of enablingconstant new product supply. However, successful market attempts arerapidly copied by the competition, leading to an accelerating spiral ofvariety-pricing games, with the inevitable result of often trivialproduct differentiation, reduced quality and pressure on prices. Theenvironmental, psychological and operational effects of this spiral aresevere. This work discusses the operational aspects from an assortmentplanning point of view, referring to the products to be included in theportfolio, as well as their inventory levels. The aim is to shift focusfrom timely information availability across the supply chain andwait-and-see planning, to the actual information needed to makesubstantial and potentially important changes, and to informationavailable at the time when important decisions are to be taken. Aproposed decision support framework - with corresponding tool set ofestimation and optimization methods - helps evaluating this, bymeasuring the value and risk of different assortment strategies, anddecisions taken at different information levels. The estimation andoptimization models presented here are consistent in their use ofsubjective knowledge and in emphasizing the importance ofattribute-based assortment planning in contemporary QR supply chains.