Joint transshipment, markdown, and clearance decisions at a fast-fashion retailer

Official URL: https://dx.doi.org/10.1080/00207543.2024.2365358

This paper considers a joint transshipment, markdown, and clearance sales decisions of multiple products for a fast-fashion retailer that owns and operates a large network of retail stores. This problem is motivated by the logistics operations of the largest apparel retailer in Turkey, namely LC Waikiki. Particularly, the emphasis is on the following questions: How should the products be re-distributed among retail stores after a few weeks of demand observation? What should be the price level for each product? And, finally, which products should be marked for clearance sales? To answer these questions, a mathematical model is proposed considering the business rules and the practices of the retailer encounters. We develop a Bender-Decomposition-based heuristic to find upper bounds and a simulated annealing-based metaheuristic to find incumbent solutions, both of which have proven to be quite effective. A Covering-Cut-Bundle approach is used to accelerate the convergence of the Bender-Decomposition algorithm. We have also conducted a set of experiments to uncover the impact of business rules on the retailer's operations and the effectiveness of joint markdown and transshipment decisions.