Paper AI vs. human buyers: A study of alibaba’s inventory replenishment system
Inventory management is one of the most important components of Alibaba’s business. Traditionally, human buyers make replenishment decisions: although artificial intelligence (AI) algorithms make recommendations, human buyers can choose to ignore these recommendations and make their own decisions. The company has been exploring a new replenishment system in which algorithmic recommendations are final. The algorithms combine state-of-the-art deep reinforcement learning techniques with the framework of fictitious play. By learning the supplier’s behavior, we are able to address the important issues of lead time and fill rate on order quantity, which have been ignored in the extant literature of stochastic inventory control. We present evidence that our algorithms outperform human buyers in terms of reducing out-of-stock rates and inventory levels. More interestingly, we have seen additional benefits.
- Authored by
- 2023
- CAAI - Operations