1、Session 08: Inventory Management With Uncertain Demand – The Newsvendor ModelProf. Sam AFLAKI NewsvendorProblemoEverymorning,anewsvendor?Ecole??HECpurchasesnewspaperstosellinStudentsinSCMcoursewonNational?thedayaward!oTradeoff:??•Ifhepurchasestoofew?newspap
2、ers,helosesprofitonunsatisfiedcustomers.Profits•IfhepurchasestoomanyJustnewspapers,helosesprofitonright!unsoldnewspapers.TooToolittle!much!•How many newspapers should he purchase? Inventory1 NewsvendorProblem:KeyFeaturesoOnlyonesellingperiodoStockingbefores
5、rLeftoverfromTECattheunitsareendofthediscountedmonthoThe “too much/too liGle problem”: •Order too much and inventory is leK over at the end of the season •Order too liGle and sales are lost. oMarkeEng’s forecast for sales is 3200 units. 3 Newsvendor model i
6、mplementaEon steps oGather economic inputs: •Selling price, producEon/procurement cost, salvage value of inventory oGenerate a demand model (discussed in Session 10): •Use empirical demand distribuEon or choose a standard distribuEon funcEon to represent de
7、mand, e.g. the normal distribuEon, the Poisson distribuEon. oChoose an objecEve: •e.g. maximize expected profit or saEsfy a fill rate constraint. oChoose a quanEty to order ConverEng between Normal distribuEons 0.0180Start with 0.0160Center the µ= 100, 0.01
8、40distribuEon over 0 σ= 25, 0.01200.0100by subtracEng the Q = 125 0.0080mean 0.00600.0180.00400.0160.00200.014-0.01202550751001251501752000.010.0080.0060.0040.450.0020.40Q−µ0z=0.35-100-75-50-250255075