A DEA-based decision analytics framework for product deletion in the luxury goods and fashion industry

Pourya Pourhejazy,Patcharaporn Thamchutha,Tago-In Namthip

doi:10.1016/j.dajour.2021.100019

Abstract

Traditionally, product deletion is a reactive decision driven by low sales volume and profit margin. However, the complexities involved in product management and consumer behavior volatilities make it necessary to account for a broad range of financial and non-financial factors. Besides, proactive product deletion may be required for a company to reduce the risk of draining resources, adjust to the market changes, and stay competitive. This study develops an analytics-based product deletion decision framework that considers multidimensional measurements, from finance to supply chain and competitive considerations. For this purpose, an innovative application of Data Envelopment Analysis (DEA) is explored within a novel framework. Input from a luxury goods company is used to evaluate the applicability of the tool. In the case study, the developed framework identified 41 out of 74 products for deletion consideration from which, two received a higher priority for possible deletion. The results provide insights into a deeper analysis of product deletion decisions showing that short-term financial perspectives should not stall managers. The study also provides recommendations for further research on modeling and implementation of product deletion decisions in practice. The developed method can be further validated and tested in other industries to contribute to this understudied topic.

Highlights

Chains are formed around the products; adjusting the company’s portfolio helps maintain the supply chains’ performance at the desired norm
The luxury goods and fashion industry is characterized by high product variety, large transport distances, long manufacturing and delivery periods, short product sales times, and demand unpredictability [27]; these characteristics together with the growing demand in the emerging economies highlight that rivalry among major corporations is mostly over the competitiveness of their supply chains
The grounds for product deletion are often set when there is a decrease in customer demand, increase in operational cost, and low marginal profit [13]; this outlook of product deletion decision is regarded as a reactive approach [15]

Summary

Introduction

Chains are formed around the products; adjusting the company’s portfolio helps maintain the supply chains’ performance at the desired norm. The contributions of the present paper are twofold; we first develop an analytics-based product deletion decision framework (dashboard) for the periodic assessment of a large set of products; this will help to both identify the inefficient products and the candidate(s) for eventual deletion For this purpose, an innovative application of the Data Envelopment Analysis (DEA) is investigated by developing a novel framework. A case study from the luxury goods and fashion industry is conducted to evaluate the applicability of the method; on this basis, a set of quantifiable factors from the financial, market, supply chain, and competitive aspects are identified for product deletion decisions in luxury goods and fashion industries.

Background and decision factors

Developed framework

Background

Data collection

Results analysis

Concluding remarks