Allocation optimization for subscription box services
Publication Date
12-14-2020
Document Type
Conference Proceeding
Publication Title
2020 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM)
Volume
2020-December
DOI
10.1109/IEEM45057.2020.9309954
First Page
746
Last Page
750
Abstract
The subscription-based models are getting increasingly popular. The most well-known examples are streaming services, food services and monthly subscription boxes. This study considers a hypothetical company with subscription-based customized package as a product. In this type of systems, the demand is for the subscribed packages provided by the company based on the customer preferences, and the company needs to determine the product assortment in the package at each period. We propose two mixed integer programming models for the optimal selection of products to subscription bags while minimizing the total cost of operations or maximizing subscriber satisfaction. We compare cost and satisfaction scores of models to provide insights. We define a general framework for creating a mathematical optimization model for subscription-based services. We segment product by brand value, such as luxury, mid-tier and affordable, to create flexibility and better understand the customer satisfaction and cost. We define a success metric for satisfaction per cost to compare various scenarios with and without product segmentation. We observed that affordable products are a good way to keep the cost down and satisfaction levels adequate.
Keywords
Integer programming, Product component allocation, Subscription boxes, Subscription-based services
Department
Industrial and Systems Engineering
Recommended Citation
S. A. Erdogan, A. Gundogdu Senturk, and J. Balasingham. "Allocation optimization for subscription box services" 2020 IEEE International Conference on Industrial Engineering and Engineering Management (IEEM) (2020): 746-750. https://doi.org/10.1109/IEEM45057.2020.9309954
