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Benefits of Postponement for Fashion Products with Forecast Updates
by

Huiling Gong
Submitted to the Engineering Systems Division in partial fulfillment of the requirements for the degree of Master of Engineering in Logistics

at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY May 2005
-.

( Massachusetts Institute of Technology 2005. All rights reserved.

Author .................................................

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Engineering Systems Divislo
a·;i-6, 5~

Certified by ..........................

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11Yoss

heffi

Professor of Civil and Environmenta Engineering Professor of Engineering Sys/ems

Thesi
Accepted by ..........................

up isor

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iYo i Sheffi

Professor of Civil and Environmental Eng eering Professor of Engineering Systems Director. MIT Center for Transportation and Logistics
MASSAC 'HUSE'TS INSTFE OF FTECHNOLOGY 01J It 1 r inn JL I J LUUFJ

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Benefits of Postponement for Fashion Products with Forecast

Updates
by
Huiling Gong
Subinitted to tlhe Engineering Systiems Division
on Naiyt 6, 2005, ill partitl flfillIlent of tle requlirelnlcnts for the degree of

Master of Engineering in Logistics

Abstract;
This thesis examlinel(s the benefit of postponlilnlent of fashion products considering te ey overage cost of the inte'rmediate pIrodulct andI the correlation between the demand for each end prodlluctsproduced froIl it. The benefit of )ostponemIleIltis Ilealsured by the percentage
incr('ease ill mIaxiinrn expected profit after (I(nImla(dis realized. The production pro('ess is modelled( as a two stag( nelwsvendor problem andllthe forecast updal)(te )athl follows an additive miartingale. A otimnal solutionI and a myopic solution are proposed to solve this I)rob)lem. Numeri('cal results indicate that. the )(lCnefit of )ost)oLnemI decretses with thle overalge cost ent of the itermedllliacte...