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Sensitivity Analysis of the Newsboy Model

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  • Khanra, Avijit
  • Soman, Chetan

Abstract

Sensitivity analysis is an integral part of inventory optimization models due to uncertainty associated with estimates of model parameters. Though the newsboy problem is one of the most researched inventory problems, very little is known about its robustness. We study sensitivity of expected demand-supply mismatch cost to sub-optimal ordering decisions in the newsboy model. Conditions for symmetry (skewness) of cost deviation have been identi ed and magnitude of cost deviation is demonstrated for normal demand distribution. We found the newsboy model to be sensitive to sub-optimal ordering decisions, much more sensitive than the economic order quantity model.

Suggested Citation

  • Khanra, Avijit & Soman, Chetan, 2013. "Sensitivity Analysis of the Newsboy Model," IIMA Working Papers WP2013-09-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:12128
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    References listed on IDEAS

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    Cited by:

    1. Khanra, Avijit & Bandyopadhyay, Tathagata, 2013. "Lower Bound for Cost Deviation in the Newsboy Model," IIMA Working Papers WP2013-11-01, Indian Institute of Management Ahmedabad, Research and Publication Department.

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