Optimization Powers a New Operating Universe at Birchbox

Thursday, January 30, 2020

As subscription e-commerce continues to expand, Birchbox, the trailblazing subscription box service, has stood out with a strong value proposition that engages underserved, overlooked, “casual” beauty and grooming consumers, and meaningfully increases their spend in the category. Birchbox, which launched in 2010, delivers five to six samples a month, tailored to each subscriber’s needs and preferences.

A subscription box service’s operational success is powered mainly by its “black box”—the custom software solution that groups subscribers into clusters and then creates configurations of available products to send to each group of subscribers. The solution must be formulated to deliver product groupings and box creations deemed “ideal” by the company’s proprietary criteria. Additionally, the solution must accommodate meaningful business changes and scale as the service grows.

The Challenge of Scale

By 2015 Birchbox had over a million subscribers and more than 800 brand partners. The company relied on a mixed-integer programming (MIP) model to group products and assign subscribers according to proprietary objectives and constraints tied to subscriber profiles, history, and activity, product and vendor attributes. This model worked adequately for several years, but as the customer base grew further and offerings expanded, solutions to this model were difficult to obtain in a reasonable amount of time, limiting business flexibility. Operations executives were forced to painstakingly manage and monitor the model because it too often could not find adequate solutions and, when it could, the average run time of 30-50 hours jeopardized production deadlines.

When the company introduced exciting improvements to its box experience in early 2019, its leaders sought to increase the flexibility of how products were assigned to a box (for example, adding a sixth sample while not compromising the integrity of the assortment). However, testing determined that the model could not adequately handle the additional mathematical complexity.

“The increase in speed and flexibility from the new model impacts every piece of our business across multiple teams. Now we can strategically invest that time in everything from building more personal customer experiences to decreasing our production costs. With this new model, Birchbox has truly entered a new operating universe.”

David Bendes
Director, Personalization and Operations Technology

Model Review and Reformulation

Birchbox leaders retained Princeton Consultants’ Optimization Practice to improve the performance of the existing model. The team of Operations Research practitioners interviewed Birchbox business and technical personnel about the existing model’s functionality, and reviewed documentation of the existing formulation. Analysis of the existing model uncovered causes of the poor performance.

In reformulating the model to meet Birchbox’s needs, the team leveraged its deep understanding of Gurobi, the optimization solver licensed by Birchbox, and advanced linear programming and MIP techniques. The team created the Reciprocating Integer Programming (RIP) technique to address this challenge.

Better Solutions, 99% Faster

The reformulated model generates better results that reduce the required number of box configurations to meet the subscriber needs. Birchbox executives can create a larger number of clusters in its machine learning approach, resulting in greater customization per subscriber.

The new model’s average run time is 10 minutes—a more than 99% improvement. David Bendes, whose team ran, monitored and adjusted the original model, described this acceleration as “life altering.” The transformed performance allows the Birchbox team to tweak inputs and re-run the model—and therefore evaluate different parameters, levels of subscriber aggregation, definitions of a “good” box, and even optimize on box value. Previously, such experimentation was impossible. Furthermore, it is quickly determined if a given set of products can meet the needs of all subscribers (e.g. is it feasible to assign every subscriber a box?)—a key for operations.

Based on Princeton Consultants’ innovative RIP technique, Birchbox executives are transforming their technology, operations and service, as they further solidify their position as a leading subscription box service.

To learn more about Princeton Consultants’ new-generation, optimization-powered solutions in e-commerce and retail, contact us to set up a call.