9

There are several models available to make the sort of decisions you are asking about. Most tend to make ordering decisions based on inventory level rather than on time: That is, they say things like "when the IL = 12, order 25" rather than "order 25 every 3 days". The newsvendor problem is usually interpreted as a periodic-review model, so if you're ...


7

This question provides a good example about a common problem we have when teaching newsvendor concepts. In some of the most useful problem settings, it can be tricky for students to properly specify holding (overage) and stockout (underage) costs. It just isn't always intuitive and it can be a disservice to students to force them to think this way in every ...


5

Only approach 1 is correct! The other two approaches double-count one of the costs. In particular, approach 2 double-counts the cost of purchasing units. The cost of purchasing units is already "baked into" the holding and stockout costs, so it is incorrect to include it explicitly in the objective function. In other words, in approach 2 we are charging $c$ ...


1

If the newsvendor model is needed, the asset is assumed to have a short selling season and forward procurement is required. Usually, one-time procurement with fixed lead time is considered in newsvendor problems, so the primary concern is to decide the quantity. When there are multiple procurement opportunities, the dynamic procurement strategy can be ...


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