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Newsvendor problems with sequentially revealed demand information

Publication ,  Journal Article
Song, JS; Zipkin, PH
Published in: Naval Research Logistics
January 1, 2012

This article analyzes a capacity/inventory planning problem with a one-time uncertain demand. There is a long procurement leadtime, but as some partial demand information is revealed, the firm is allowed to cancel some of the original capacity reservation at a certain fee or sell off some inventory at a lower price. The problem can be viewed as a generalization of the classic newsvendor problem and can be found in many applications. One key observation of the analysis is that the dynamic programming formulation of the problem is closely related to a recursion that arises in the study of a far more complex system, a series inventory system with stochastic demand over an infinite horizon. Using this equivalence, we characterize the optimal policy and assess the value of the additional demand information. We also extend the analysis to a richer model of information. Here, demand is driven by an underlying Markov process, representing economic conditions, weather, market competition, and other environmental factors. Interestingly, under this more general model, the connection to the series inventory system is different. © 2012 Wiley Periodicals, Inc. Naval Research Logistics 2012 Copyright © 2012 Wiley Periodicals, Inc.

Duke Scholars

Published In

Naval Research Logistics

DOI

EISSN

1520-6750

ISSN

0894-069X

Publication Date

January 1, 2012

Volume

59

Issue

8

Start / End Page

601 / 612

Related Subject Headings

  • Logistics & Transportation
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1503 Business and Management
  • 0103 Numerical and Computational Mathematics
  • 0102 Applied Mathematics
 

Citation

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Song, J. S., & Zipkin, P. H. (2012). Newsvendor problems with sequentially revealed demand information. Naval Research Logistics, 59(8), 601–612. https://doi.org/10.1002/nav.21509
Song, J. S., and P. H. Zipkin. “Newsvendor problems with sequentially revealed demand information.” Naval Research Logistics 59, no. 8 (January 1, 2012): 601–12. https://doi.org/10.1002/nav.21509.
Song JS, Zipkin PH. Newsvendor problems with sequentially revealed demand information. Naval Research Logistics. 2012 Jan 1;59(8):601–12.
Song, J. S., and P. H. Zipkin. “Newsvendor problems with sequentially revealed demand information.” Naval Research Logistics, vol. 59, no. 8, Jan. 2012, pp. 601–12. Scopus, doi:10.1002/nav.21509.
Song JS, Zipkin PH. Newsvendor problems with sequentially revealed demand information. Naval Research Logistics. 2012 Jan 1;59(8):601–612.
Journal cover image

Published In

Naval Research Logistics

DOI

EISSN

1520-6750

ISSN

0894-069X

Publication Date

January 1, 2012

Volume

59

Issue

8

Start / End Page

601 / 612

Related Subject Headings

  • Logistics & Transportation
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1503 Business and Management
  • 0103 Numerical and Computational Mathematics
  • 0102 Applied Mathematics