Hyper-local sustainable assortment planning
This addresses the need for sustainable retail practices by integrating environmental metrics into assortment planning, though it is incremental as it builds on existing optimization methods.
The paper tackles the problem of assortment planning by incorporating environmental impact alongside revenue, using a multi-objective optimization approach that yields Pareto-optimal assortments. Results show it is possible to select assortments with lower environmental impact while minimally affecting revenue for a fashion retailer.
Assortment planning, an important seasonal activity for any retailer, involves choosing the right subset of products to stock in each store.While existing approaches only maximize the expected revenue, we propose including the environmental impact too, through the Higg Material Sustainability Index. The trade-off between revenue and environmental impact is balanced through a multi-objective optimization approach, that yields a Pareto-front of optimal assortments for merchandisers to choose from. Using the proposed approach on a few product categories of a leading fashion retailer shows that choosing assortments with lower environmental impact with a minimal impact on revenue is possible.