The newsboy with known demand and uncertain replenishment: Applications to quality control and container fill

doi:10.1016/0167-6377(92)90042-2

Operations Research Letters

Volume 11, Issue 2, March 1992, Pages 111-117

https://doi.org/10.1016/0167-6377(92)90042-2 Get rights and content

Abstract

Consider a newsboy problem with known demand and random replenishment. The distribution of the replenishment quantity is determined by a location-scale parameter, (μ, δ), which can be controlled. The usual expected cost function includes a separate term associated with the choice of δ. The asymptotic behavior of the optimal parameter values, as functions of the holding and shortage costs, is examined.

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Cited by (5)

A newsboy problem with reactive production
2001, Computers and Operations Research
This paper extends the classic newsboy problem by introducing reactive production. Production occurs in two stages, a anticipatory stage and a reactive stage. In the anticipatory stage, one determines a production level that anticipates the demand, all of which occurs in the reactive stage. There production takes place with full knowledge of the actual demand and, thus, can react to it. The reactive stage contains multiple sources of capacitated production. Demand is continuous and stochastic, and production, holding, and shortage costs are proportional. There are no fixed costs. Shortages are lost. Our model reduces to a single-period model with piecewise-linear convex costs. We obtain an analogue of the well-known critical fractile formula of the classic newsboy model. We also undertake a numerical study that compares our model with (i) the classic newsboy model, and (ii) a model which employs reactive production but uses classic newsboy formulas. Extensive computational experiments with normal demand problems suggest that the costs under our model can be substantially less than the costs under (i) and (ii).
Consider a seasonal product with a long-selling season and a highly volatile stochastic demand. The classic newsboy formulation of this problem assumes that all unsold goods be salvaged at a price that is often far below the production cost. This could lead to unacceptably low service levels since it tends to discourage high stock levels. On the other hand, were management to raise the service level to an acceptable level, the cost of the safety stock might be too great because of the highly volatile demand. To address this difficulty, we modify the classic newsboy problem by allowing management to schedule production in reaction to the demand during the selling period. Such production is possible when the selling period encompasses a long time interval. Our results indicate that this modification can significantly improve both costs and service levels.
Planning production on an unreliable machine for multiple items subject to stochastic demand
2012, International Series in Operations Research and Management Science
Execution errors in retail supply chains: Analysis of the case of misplaced products
2008, International Journal of Systems Science
Inventory systems with random arrival of shipments
2006, International Journal of Advanced Manufacturing Technology
Inverse newsvendor problem: Choosing an optimal demand portfolio for capacitated resources
2000, Management Science

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The newsboy with known demand and uncertain replenishment: Applications to quality control and container fill

Abstract

Oper. Res. Lett.

Yield randomness, cost tradeoffs, and diversification in the EOQ model

Naval Res. Logist.

Determination of the optimal process mean and the upper limit for a canning problem

J. Quality Technol.

Cost savings due to variance reduction in a canning process

The structure of periodic review policies in the presence of random yield

Oper. Res.