Alibaba Realizes Millions in Cost Savings Through Integrated Demand Forecasting, Inventory Management, Price Optimization, and Product Recommendations

Yuming Deng (), Xinhui Zhang (), Tong Wang (), Lin Wang (), Yidong Zhang (), Xiaoqing Wang (), Su Zhao (), Yunwei Qi (), Guangyao Yang () and Xuezheng Peng ()
Additional contact information
Yuming Deng: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Xinhui Zhang: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China; Alibaba Freshippo Division, Hangzhou, Zhejiang 311121, China
Tong Wang: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Lin Wang: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Yidong Zhang: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Xiaoqing Wang: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Su Zhao: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Yunwei Qi: Alibaba Digital Supply Chain Divisio, Hangzhou, Zhejiang 311121, China
Guangyao Yang: Alibaba Freshippo Division, Hangzhou, Zhejiang 311121, China
Xuezheng Peng: Alibaba Freshippo Division, Hangzhou, Zhejiang 311121, China

Interfaces, 2023, vol. 53, issue 1, 32-46

Abstract: Alibaba, which operates one of the world’s largest e-commerce platforms, designed a comprehensive omnichannel retail infrastructure that enables both online and offline ordering of products, ranging from general merchandise to fresh produce. Intelligent decisions in the supply chain, such as demand forecasting, inventory management, and price optimization, are critical to the success of any retail business; however, many unique features in retail operations defy traditional operations research solutions and pose considerable challenges. Alibaba developed a series of models and algorithms, namely, deep-learning algorithms for demand forecasting, simulation optimization–based models for inventory management, price optimization for promotions, and markdown optimization for product recommendations. Alibaba has implemented these algorithms in almost all its retail businesses over the last three years and has generated, on an annual basis, $42 million of savings in shrinkage and inventory costs, $110 million in increased sales, and $13 million dollars in increased profit.

Keywords: demand forecasting; inventory management; price optimization; product recommendation; simulation optimization; Edelman award (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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