IE Seminar: “Data-driven Dynamic Pricing and Ordering with Perishable Inventory in a Changing Environment”, Jeannette Song, 4:00PM November 5 (EN)

Speaker: Jeannette Song, Duke University
Date & Time: November 5, 2021, Friday, 16:00

***This is an online event. To obtain Zoom link and password, please contact to the department.

Title: Data-driven Dynamic Pricing and Ordering with Perishable Inventory in
a Changing Environment

Abstract: We consider a grocery retailer selling a perishable product in a
dynamic environment where consumers’ price sensitivity changes at unknown
times (due to pandemics, weather events, etc.), and the product perishes at
an unknown rate. We design online price experiments for learning about these
unknown features over time. We then prescribe how to use the newly gained
knowledge and the most up-to-date data to make informed joint pricing and
inventory ordering decisions. Depending on whether the demand shock
distribution is parametric or nonparametric, we design two versions of the
data-driven pricing and ordering (DDPO) algorithm with the best achievable
performance guarantee. Implementing our algorithm on a real-life data set
from a supermarket chain, we show that our data-driven, learning-and-earning
approach significantly outperforms the historical decisions of the
supermarket chain by reducing the profit loss due to uncertainty by over
80%. In particular, avoiding active learning for price-sensitivity changes
leads to an annual profit loss of over 62 million U.S. dollars; avoiding
active learning for perishability results in a yearly profit loss of over 11
million U.S. dollars. (Joint work with Bora Keskin and Yuexing Li of Duke

Bio: Jeannette Song is the R. David Thomas Professor of Business
Administration and a Professor of Operations Management at the Fuqua School
of Business of Duke University. She obtained her Ph.D. from Columbia
University. Professor Song’s expertise is in supply chain management and
operations strategy. Her current research projects include data-driven
operational decision making, 3D printing and supply chain digitization,
global supply chain risk mitigation, and socially responsible operations.
She is an INFORMS Fellow and a Fellow and former President of the
Manufacturing and Service Operations Management (MSOM) Society. She
currently serves as a Department Editor for Management Science and Service