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A censored-data multiperiod inventory problem with newsvendor demand distributions

Publication ,  Journal Article
Bisi, A; Dada, M; Tokdar, S
Published in: Manufacturing and Service Operations Management
September 1, 2011

We study the stochastic multiperiod inventory problem in which demand in excess of available inventory is lost and unobserved so that demand data are censored. A Bayesian scheme is employed to dynamically update the demand distribution for the problem with storable or perishable inventory and with exogenous or endogenous price. We show that the Weibull is the only newsvendor distribution for which the optimal solution can be expressed in scalable form. Moreover, for Weibull demand the cost function is not convex in general. Nevertheless, in all but the storable case, sufficient structure can be discerned so that the optimal solution can be easily computed. Specifically, for the perishable inventory case, the optimal policy can be found by solving simple recursions, whereas the perishable case with pricing requires solutions to more complex one-step lookahead recursions. Interestingly, for the special case of exponential demand the cost function is convex, so that for the storable inventory case, the optimal policy can be found using simple one-step look-ahead recursions whereas for the perishable case the optimal policy can be expressed by exact closed-form formulas. © 2011 INFORMS.

Duke Scholars

Published In

Manufacturing and Service Operations Management

DOI

EISSN

1526-5498

ISSN

1523-4614

Publication Date

September 1, 2011

Volume

13

Issue

4

Start / End Page

525 / 533

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1505 Marketing
  • 1503 Business and Management
  • 0102 Applied Mathematics
 

Citation

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Bisi, A., Dada, M., & Tokdar, S. (2011). A censored-data multiperiod inventory problem with newsvendor demand distributions. Manufacturing and Service Operations Management, 13(4), 525–533. https://doi.org/10.1287/msom.1110.0340
Bisi, A., M. Dada, and S. Tokdar. “A censored-data multiperiod inventory problem with newsvendor demand distributions.” Manufacturing and Service Operations Management 13, no. 4 (September 1, 2011): 525–33. https://doi.org/10.1287/msom.1110.0340.
Bisi A, Dada M, Tokdar S. A censored-data multiperiod inventory problem with newsvendor demand distributions. Manufacturing and Service Operations Management. 2011 Sep 1;13(4):525–33.
Bisi, A., et al. “A censored-data multiperiod inventory problem with newsvendor demand distributions.” Manufacturing and Service Operations Management, vol. 13, no. 4, Sept. 2011, pp. 525–33. Scopus, doi:10.1287/msom.1110.0340.
Bisi A, Dada M, Tokdar S. A censored-data multiperiod inventory problem with newsvendor demand distributions. Manufacturing and Service Operations Management. 2011 Sep 1;13(4):525–533.

Published In

Manufacturing and Service Operations Management

DOI

EISSN

1526-5498

ISSN

1523-4614

Publication Date

September 1, 2011

Volume

13

Issue

4

Start / End Page

525 / 533

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1505 Marketing
  • 1503 Business and Management
  • 0102 Applied Mathematics