TY - JOUR
T1 - Newsvendor characterizations for one-warehouse multi-retailer inventory systems with descrete demand under the balance assumption
AU - Dogru, M.K.
AU - Kok, de, A.G.
AU - Houtum, van, G.J.J.A.N.
PY - 2013
Y1 - 2013
N2 - This paper considers a one-warehouse multi-retailer inventory system that faces discrete stochastic demand of the customers. Under the so-called balance assumption (also known as the allocation assumption), base stock policies are optimal. Our main contribution is to show that the optimal base stock levels satisfy newsvendor characterizations, which are in terms of inequalities, and to extend the newsvendor equalities known for the continuous demand model. These characterizations are
appealing because they (i) are easy to explain to nonmathematical oriented people like managers and MBA students, (ii) contribute to the understanding of optimal control, (iii) help intuition development by providing direct relation between cost and optimal policy parameters.
AB - This paper considers a one-warehouse multi-retailer inventory system that faces discrete stochastic demand of the customers. Under the so-called balance assumption (also known as the allocation assumption), base stock policies are optimal. Our main contribution is to show that the optimal base stock levels satisfy newsvendor characterizations, which are in terms of inequalities, and to extend the newsvendor equalities known for the continuous demand model. These characterizations are
appealing because they (i) are easy to explain to nonmathematical oriented people like managers and MBA students, (ii) contribute to the understanding of optimal control, (iii) help intuition development by providing direct relation between cost and optimal policy parameters.
U2 - 10.1007/s10100-012-0246-7
DO - 10.1007/s10100-012-0246-7
M3 - Article
VL - 21
SP - 541
EP - 559
JO - Central European Journal for Operations Research and Economics
JF - Central European Journal for Operations Research and Economics
SN - 1435-246X
IS - 3
ER -