A Distributionally Robust Optimization Approach to Quick Response Models under Demand Uncertainty

TL;DR

This paper introduces a distributionally robust optimization framework for quick response models in manufacturing, improving environmental and economic outcomes under demand uncertainty and limited data.

Contribution

It develops a novel DRO-based quick response model with waste-to-consumption constraints, addressing demand ambiguity and environmental impact.

Findings

DRO approach outperforms traditional models under demand shifts.

Constrained model achieves higher profits with less total waste.

Robust policies mitigate performance degradation due to demand uncertainty.

Abstract

Quick response is a widely adopted strategy to mitigate overproduction in the manufacturing industry, yet recent research reveals a counter-intuitive paradox: while it reduces waste from unsold finished goods, it may incentivize firms to procure more raw materials, potentially increasing total system waste. Additionally, existing models that guide quick response strategies rely on the assumption of a known demand distribution, whereas in practice, demand patterns are often ambiguous and historical data are scarce. To address these challenges, we develop a distributionally robust optimization (DRO) framework for the quick response model that builds robust policies even with limited data. We further integrate a novel waste-to-consumption ratio constraint into this framework, empowering firms to explicitly control the environmental impact of their operations. Our numerical experiments demonstrate that policies optimized for specific demand assumptions suffer severe performance degradation under distributional shifts, whereas our data-driven DRO approach consistently delivers superior robustness. Moreover, we find that the constrained quick response model resolves the central paradox: it can achieve higher profits with verifiably less total waste than a traditional, non-flexible alternative. These results resolve the `quick response or not' debate by showing that the question is not \emph{whether} to use quick response, but \emph{how} to manage it. By incorporating socially responsible metrics as constraints, the quick response system delivers a `win-win' outcome for both profitability and the environment compared to traditional systems.