Shuo Sun

While single-purchase choice models have been widely studied in assortment optimization, customers in modern retail and e-commerce environments often purchase multiple items across distinct product categories, exhibiting both substitution and complementarity. We consider the cross-category assortment optimization problem where retailers jointly determine assortments across categories to maximize expected revenue. Most prior work on the topic either overlooks complementarity or proposes models that lead to intractable optimization problems, despite being based on the multinomial logit (MNL) choice model. We propose a sequential multi-purchase choice model for cross-category choice that incorporates complementarity through a Markovian transition structure across categories, while allowing general Random Utility Maximization (RUM)-based choice models to capture the within-category substitution. We develop an Expectation-Maximization algorithm for estimation, and a polynomial-time algorithm for unconstrained assortment optimization that yields the optimal solution when the within-category substitution follows a Markov chain choice model. Furthermore, we introduce an empirical metric to quantify complementarity strength across product categories and conduct extensive numerical experiments on both synthetic data and a large-scale transaction-level dataset from a major US grocery store. Our model yields improvements in predictive accuracy, model fit, and expected revenue in setting with complementarity, and it reveals intuitive market structures such as brand-loyal cross-category purchasing. Overall, we believe that our model provides a theoretically-grounded and practical framework for modeling complementarity and making better cross-category assortment decisions.

We consider assortment and inventory planning problems with dynamic stockout-based substitution effects, and without replenishment, in two different settings: (1) Customers can see all available products when they arrive, a typical scenario in physical stores. (2) The seller can choose to offer a subset of available products to each customer, which is more common on online platforms. Both settings are known to be computationally challenging, and the current approximation algorithms for the two settings are quite different. We develop a unified algorithm framework under the MNL choice model for both settings. Our algorithms improve on the state-of-the-art algorithms in terms of approximation guarantee and runtime, and the ability to manage uncertainty in the total number of customers and handle more complex constraints. In the process, we establish various novel properties of dynamic assortment planning (for the MNL choice model) that may be useful more broadly.

This paper presents data-driven approaches for integrated assortment planning and inventory allocation that significantly improve fulfillment efficiency at JD.com, a leading E-commerce company. JD.com uses a two-level distribution network that includes regional distribution centers (RDCs) and front distribution centers (FDCs). Selecting products to stock at FDCs and then optimizing daily inventory allocation from RDCs to FDCs is critical to improving fulfillment efficiency, which is crucial for enhancing customer experiences. For assortment planning, we propose efficient algorithms to maximize the number of orders that can be fulfilled by FDCs (local fulfillment). For inventory allocation, we develop a novel end-to-end algorithm that integrates forecasting, optimization, and simulation to minimize lost sales and inventory transfer costs. Numerical experiments demonstrate that our methods outperform existing approaches, increasing local order fulfillment rates by 0.54% and our inventory allocation algorithm increases FDC demand satisfaction rates by 1.05%. Considering the high-volume operations of JD.com, with millions of weekly orders per region, these improvements yield substantial benefits beyond the company’s established supply chain system. Implementation across JD.com’s network has reduced costs, improved stock availability, and increased local order fulfillment rates for millions of orders annually.

In this work, we consider an online robust Markov Decision Process (MDP) where we have the information of finitely many prototypes of the underlying transition kernel. We consider an adaptively updated ambiguity set of the prototypes and propose an algorithm that efficiently identifies the true underlying transition kernel while guaranteeing the performance of the corresponding robust policy. To be more specific, we provide a sublinear regret of the subsequent optimal robust policy. We also provide an early stopping mechanism and a worst-case performance bound of the value function. In numerical experiments, we demonstrate that our method outperforms existing approaches, particularly in the early stage with limited data. This work contributes to robust MDPs by considering possible prior information about the underlying transition probability and online learning, offering both theoretical insights and practical algorithms for improved decision-making under uncertainty.