Service level enhancement in newsvendor model

Aldaihani, Majid M.; Darwish, Mohammed A.

doi:10.1016/j.cie.2016.05.027

Cited by 4 publications

(2 citation statements)

References 18 publications

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“…Differences are even bigger when the optimal order is constrained with the required at least service level of demand. Service level commitment is used, for example, to force a monopolist to supply quantity that is bigger than the one that maximizes expected profit [1].…”

Section: Na -Not Applicablementioning

confidence: 99%

The newsvendor problem with normal, worst-case and binomial distribution of demand: Managerial implications with examples

Brzęczek,

Hrabec

2024

JIMO

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The paper examines the newsvendor problem with demand distributions commonly used in the literature. Optimal order convergence is checked numerically. An important contribution is that the expected profits differ considerably in nominal and relative terms when the profit-loss ratio is low valued while the demand variability is at least moderate. Missed expected profit reaches even 10% of total order cost for a mark-up that equals to the worst case break even one. The optimal order quantities are compared to counterparts derived from sales data. The main managerial implication indicates that the normal distribution solution outperforms distribution-free solutions in predicting the maximal expected profit under empirical demand. Therefore, the MaxiMin solution is recommended to be used in practice to simplify the maximal expected profit calculus and for break-even mark-up evaluation. However, it should not be used to solve the optimal order quantity because the worst-case distribution asymmetry is determined by the profit-to-loss ratio and can be contradictory to the asymmetry of sales data. Moreover, the normal distribution optimum bounded with 0.8 service level commitment shows negative expected profit under mark-up from the range of 5-20% while demand variability is low or moderate proportionally to mark-up.

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Section: Na -Not Applicablementioning

confidence: 99%

The newsvendor problem with normal, worst-case and binomial distribution of demand: Managerial implications with examples

Brzęczek,

Hrabec

2024

JIMO

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“…Ray and Jenamani [33] studied a two-echelons supply chain with a risk-averse buyer and multiple unreliable suppliers under newsvendor setting by designing a mean-variance objective function to maximize the buyer's expected profit while minimizing its variance. Aldaihani and Darwish [34] considered a newsvendor model which allowed the vendor to place an initial order that satisfied a predetermined fill rate. Fera et al [35] analysed and categorized the themes related to the production issues of additive manufacturing technology to reduce the risks in supply chains.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal Order Policies for Dual-Sourcing Supply Chains under Random Supply Disruption

Yan

Kou

2019

Sustainability

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In this paper, we investigate inventory and order strategies of a two-echelon supply chain, which is composed of two unreliable suppliers that are subject to random disruption. We develop the gross weighted profit benchmark model and the service level constrained model of the supply chain, respectively. We derive the retailer's optimal order quantity and analyze the retailer' optimal order policy and also obtain the analytical closed-form solutions. In addition, some numerical examples are provided to illustrate the effect of disruption time, disruption probability and fill rate on the optimal decisions and expected profit.

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A two-stage capacity reservation supply contract with risky supplier and forecast updating

Cheaitou

Cheaytou

2019

International Journal of Production Economics

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Service level enhancement in newsvendor model

Cited by 4 publications

References 18 publications

The newsvendor problem with normal, worst-case and binomial distribution of demand: Managerial implications with examples

The newsvendor problem with normal, worst-case and binomial distribution of demand: Managerial implications with examples

Optimal Order Policies for Dual-Sourcing Supply Chains under Random Supply Disruption

A two-stage capacity reservation supply contract with risky supplier and forecast updating

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