Multi-Objective Assortment Optimization: Profit, Risk, Customer Utility, and Beyond
By Zhen Chen, W. P. Carey School of Business, Arizona State University, USA, zchen328@asu.edu | Heng Zhang, W. P. Carey School of Business, Arizona State University, USA, hengzhang24@asu.edu | Hongmin Li, W. P. Carey School of Business, Arizona State University, USA, Hongmin.Li@asu.edu | Scott Webster, W. P. Carey School of Business, Arizona State University, USA, Scott.Webster@asu.edu
Abstract
Assortment optimization is a fundamental challenge in revenue management, aiming to offer a subset from all products on hand to maximize expected revenue. However, businesses often face multiple goals that go far beyond revenue, and these goals are sometimes even in conflict with each other. In this study, we introduce a comprehensive framework and a new reformulation technique for tackling multi-objective assortment optimization problems. We focus on the sum of multiple convex objective functions (i.e., the tradeoff between distinct objectives), and we propose a reformulation that effectively “linearizes” the problem. We demonstrate that this reformulated problem is equivalent to the original and provides a unified solution approach for various multi-objective contexts. Our method covers a broad range of operational objectives, such as risk, customer utility, market share, costs with economies of scale, and dualized convex constraints. We analyze the multi-objective problem in the context of the multinomial logit model, the nested logit model, and the Markov chain choice model, and demonstrate the effciency and practicality of our approach through extensive numerical experiments. Our work presents a powerful and versatile tool for addressing multi-objective assortment problems frequently encountered in real-world revenue management scenarios.
Supply Chain Finance and Risk Management in a Digital Era
This special issue, which surveys the most recent research in integrated risk management for supply chains, is motivated by the success of the 8th “Supply Chain Finance and Risk Management Workshop,” which was held at the Olin Business School of Washington University in St. Louis on May 30 and May 31, 2023. The Editors wanted timelier access to the latest research on supply chain finance and supply chain risk management. It is well-known, that due to review process lead times, articles published in traditional journals can take 2 to 3 years. The idea of producing an edited volume, which would include the latest articles on the topics above appealed not only to the workshop participants but also to other active members of the iFORM (Interface of Finance, Operations, and Risk Management) research community. Foundations and Trends in Technology, Information and Operations Management provides an ideal outlet for such a volume.
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Foundations and Trends® in Technology, Information and Operations Management, Volume 18, Issue 1 Special Issue: Supply Chain Finance and Risk Management in a Digital Era
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