• Journal of the Korean Operations Research and Management Science Society
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• v.36 no.3
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• pp.27-43
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• 2011

This paper investigates properties of the newsvendor problem under a schedule involving progressive multiple discounts compared with the standard newsvendor problem under a no-discounts schedule. Unlike most conventional approaches using the criticial fractile to analyze the retailer and/or supplier behavior(s) in the newsvendor problem, our approach uses riskless profit. From the properties revealed through a series of computational experiments, two conjectures regarding the relationship between the expected profits of both newsvendor problems as a generalization over Khouja's argument (1995) are raised. Those conjectures encourage newsvendors who may face budget or warehouse capacity restriction to use the extended model under a multiple-discounts schedule rather than the standard model with no-discounts schedule because they apply for every order quantity as well as the optimal order quantity. In addition to the conjectures, some insightful results are found to justify the implementation of a multiple-discounts schedule from the computational experiments and a new interpretation for implementation of a multiple-discounts schedule that has not been addressed in Khouja is provided.

• Journal of the Korean Operations Research and Management Science Society
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• v.37 no.1
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• pp.1-18
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• 2012

The present study provides some extensions over a recent work in Won (2011) which investigates properties of the static newsvendor problem under a schedule involving progressive multiple discounts under the assumption that demand is given exogenously. Khouja (1995, 1996) formulated the extended versions over the classical newsvendor model with various discount policies including all-units discount and/or multiple discounts and found that the extended newsvendor models with discount schedules yield higher optimal expected profits than the classical newsvendor model with no-discounts. In this study, we establish a robust conjecture as a stronger statement than Khouja's findings with regard to the general relationship among the expected profits of newsvendor models in the sense that the conjecture holds for every order quantity as well as the optimal order quantity. The conjecture encourages the newsvendor facing quantity discounts to safely implement her own discounts policy to customer or accept quantity discounts offered by the supplier even if the optimal order quantity cannot be ordered due to additional restrictions such as budget or warehouse capacity constraints because the newsvendor models with quantity discounts always yield higher expected profit than the classic newsvendor model without quantity discounts regardless of the order quantity. Results from wide experiments with various probability distributions of demand strongly support our conjecture.

• Journal of the Korean Operations Research and Management Science Society
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• v.37 no.3
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• pp.13-21
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• 2012

In this note, a recent work in Won (2011) which investigates properties of the newsvendor model under progressive multiple discounts is revisited and a complete proof is provided for the conjecture on the consistent advantage of progressive multiple discounts over no-discounts in terms of the expected profit. The proof considers the generalized newsvendor model under progressive multiple discounts extended with positive shortage cost and salvage value which have not been considered in the previous newsvendor models under progressive multiple discounts. Without relying on derivatives, we prove that the expected profit under progressive multiple discounts are consistently greater than or equal to the one under no-discounts for every order quantity as far as her multiple discounts do not decrease customer demand, and therefore, the optimal expected profit under progressive multiple discounts is always greater than or equal to the one under no-discounts. As by-products from the proof, some interesting features of the generalized newsvendor model under progressive multiple discounts are revealed.

• Proceedings of the Korean Operations and Management Science Society Conference
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• 2006.05a
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• pp.187-192
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• 2006

In the absence of a clear command and control structure, a key challenge in supply chain management is the coordination and alignment of the supply chain members who pursue divergent and often conflicting goals. The newsvendor model is typically used as a framework to quantify the cost of misalignment and to assess the impact of coordination initiatives. This paper considers a fuzzy approach for the newsvendor problem which includes a single manufacturer and a single retailer. We use several fuzzy parameters in the model such as the demand, the wholesale price, and the market sales price. We apply a coordination policy, referred to as buyback, to solve the fuzzy newsvendor problem. Based on the buyback policy, the optimal order quantity of the retailer can be computed, and the possible profits of the members in the supply chain can be calculated with minimum sharing of private information. Focusing on the fuzzy model with buyback policy for the newsvendor problem, we illustrate exemplary fuzzy models. We also illustrate an integration model, which extends a single-manufacturer-single-retailer model to the single-manufacturer-multiple-retailer setting. In the extended model, we consider three coordination policies including quantity discount, profit sharing, and buyback, as well as non-coordination case.

• Korean Management Science Review
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• v.28 no.2
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• pp.17-29
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• 2011

The purpose of this paper is to schedule elective surgery patients using a stochastic programming approach and to illustrate how operating room utilization behaves when a decision-maker varies costs associated with utilization. Because of the uncertainty in surgery durations, the underage and overage costs that a decision-maker considers plays an important role in allocating surgery cases into available operating room capacity. We formulate the problem as a stochastic mixed integer programming and propose a sampling-based approximation method for a computational purpose. Newsvendor model is employed to explain the results from numerical experiments that are conducted with the actual data from a hospital. The results show that the operating room utilization is more sensitive when the unit overtime cost is relatively larger than the unit cost for underutilized time.

• Journal of Korean Society for Quality Management
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• v.40 no.4
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• pp.441-452
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• 2012

Purpose: In this paper, we have considered a problem of newsvendor model in an environment of random yields in quality and customer balking behavior, in which only the mean and the variance of the demand are known. In practice, the distributional information of the demand is very limited and only the mean and variance are guessed by experience. In addition, due to the customers balking behavior occurring when the available inventory level decreases, the product's demand becomes a function of inventory level so that the classical newsvendor's optimal order quantity is no longer optimal. Methods: We have developed an optimal order quantity model that enables us to incorporate the random yield of a product and the customer balking information such as a threshold inventory level of balking and the corresponding probability of a sale during the balking. Results: We illustrated the concepts developed here through simple numerical examples and showed the robustness of our model in a various setting of parameters. Conclusion: This paper provides a useful analysis showing that our distribution-specific and distribution-free approach to the optimal order quantity in the newsboy model can act as an effective tools to match supply with demand for these product lines.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.42 no.1
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• pp.41-54
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• 2019

Although retailers deals with a large number of single-term inventory items, but few cases have been considered in the areas of practical decision making. However, recent moves to strengthen fair trade have created a real need for single-period inventory decision-making problems. This study addresses the problem of ordering quantity decisions that are expected to maximize profits using classical newsvendor models. The research target is data on seasonal and perishable products from retail. We also use data from retailers to actually apply the newsvendor model and calculate the results to compare performance. It also suggests solutions for estimating demand for products sold in order to apply newsvendor models that utilize actual demand ratio versus forecast demand. This study would like to examine the effectiveness of this research through data analysis and make some suggestions for applying it to reality.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.30 no.2
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• pp.75-82
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• 2007

이 논문의 공급업체의 불확실성하에서의 신문팔이 문제를 다루고 있다. 즉 공급업체의 공급량이 소매업체가 주문한 양을 충족하기 못하는 상황을 고려한 것이다. 여기서 우리는 기대 이익을 최대화하는 최적의 주문량을 구하였고, 기존의 연구와 달리 소매업체의 위험 성향을 고려하기 위해 하향 라스크에 대한 제약 조건을 추가하여, 위험 성향이 높을수록 더 많은 주문량을 사용한다는 결과를 사례 연구를 통해 확인할 수 있었다.

• Journal of the Korean Operations Research and Management Science Society
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• v.38 no.2
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• pp.43-63
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• 2013

Remanufacturing is a process of recovering end-of-life products into serviceable parts for producing new products. Due to the limited supply of recovery cores to remanufacture, a remanufacturing firm also needs to produce or procure new parts for fulfilling the demand. This paper is targeted for solving the problem of determining the optimal amount of newly produced and remanufacturing parts, which is called production and remanufacturing planning (PRP) problem, under uncertain supply of recovery cores. The new production mitigates the risk of insufficient core supply while it takes more costs than the remanufacturing. The PRP model in this paper also considers disassemble-to-order (DTO) environment, in which multiple kinds of parts are remanufactured from multiple products on order of the parts. Whereas existing studies presents only heuristic solutions for DTO remanufacturing, this paper provides an exact solution for this problem and analytical sensitivity of the involved cost parameters, adopting multi-dimensional newsvendor modeling and stochastic linear programming techniques. The result shows that production and remanufacturing plans for multiple products are mutually dependent, and a change of cost parameters involved in only one part is propagated to all other parts.

• Industrial Engineering and Management Systems
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• v.7 no.3
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• pp.257-265
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• 2008

This paper deals with the joint decisions on pricing and ordering for a monopolistic retailer who sells perishable goods with a fixed lifetime or demand period. The newsvendor-typed problem is formulated as a two-period inventory system where the first period represents the inventory of fresh or new-arrival items and the second period represents the inventory of items that are older but still usable. Demand may be for either fresh items or for somewhat older items that exhibit physical decay or deterioration. The retailer is allowed to adjust the selling price of the deteriorated items in the second period, which stimulates demand and reduces excess season-end or stale inventory. This paper develops a stochastic dynamic programming model that solves the problem of preseason decisions on ordering-pricing and a within-season decision on markdown pricing. We also develop a fixed-price model as a benchmark against the dual-price dynamic model. To illustrate the effect of the dual-price policy on expected profit, we conduct a comparative study between the two models. Extension to a generalized multi-period model is also discussed.