Journal of Korean Society of Industrial and Systems Engineering (산업경영시스템학회지)

Society of Korea Industrial and System Engineering (한국산업경영시스템학회)
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Economic Value Analysis of Asian Dust Forecasts Using Decision Tree-Focused on Medicine Inventory Management

의사결정트리를 활용한 황사예보의 경제적 가치 분석-의약품 재고관리문제를 중심으로

  • Received : 2014.02.20
  • Accepted : 2014.03.03
  • Published : 2014.03.31
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Abstract

This paper deals with the economic value analysis of meteorological forecasts for a hypothetical inventory decision-making situation in the pharmaceutical industry. The value of Asian dust (AD) forecasts is assessed in terms of the expected value of profits by using a decision tree, which is transformed from the specific payoff structure. The forecast user is assumed to determine the inventory level by considering base profit, inventory cost, and lost sales cost. We estimate the information value of AD forecasts by comparing the two cases of decision-making with or without the AD forecast. The proposed method is verified for the real data of AD forecasts and events in Seoul during the period 2004~2008. The results indicate that AD forecasts can provide the forecast users with benefits, which have various ranges of values according to the relative rate of inventory and lost sales cost.

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References

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