Newsvendor characterizations for one-warehouse multi-retailer inventory systems with descrete demand under the balance assumption

Research output: Contribution to journalArticleAcademicpeer-review

6 Citations (Scopus)
74 Downloads (Pure)

Abstract

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.
Original languageEnglish
Pages (from-to)541-559
Number of pages18
JournalCentral European Journal for Operations Research and Economics
Volume21
Issue number3
DOIs
Publication statusPublished - 2013

Fingerprint Dive into the research topics of 'Newsvendor characterizations for one-warehouse multi-retailer inventory systems with descrete demand under the balance assumption'. Together they form a unique fingerprint.

  • Cite this