IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v202y2010i2p502-517.html
   My bibliography  Save this article

Optimal inventory decisions in a multiperiod newsvendor problem with partially observed Markovian supply capacities

Author

Listed:
  • Wang, Haifeng
  • Chen, Bocheng
  • Yan, Houmin

Abstract

This paper considers a multi-period news-vendor problem with partially observed supply-capacity information which evolves as a Markovian Process. The supply capacity is fully observed by the buyer when the capacity is smaller than the buyer's ordering quantity. Otherwise, the buyer knows that the current-period supply capacity is greater than its ordering quantity. Based on these two observations, the buyer updates the future supply-capacity forecasting accordingly. With a dynamic programming formulation, we prove the existence of an optimal ordering policy. We also prove that the optimal order quantity is greater than the myopic order quantity.

Suggested Citation

  • Wang, Haifeng & Chen, Bocheng & Yan, Houmin, 2010. "Optimal inventory decisions in a multiperiod newsvendor problem with partially observed Markovian supply capacities," European Journal of Operational Research, Elsevier, vol. 202(2), pages 502-517, April.
    • Handle: RePEc:eee:ejores:v:202:y:2010:i:2:p:502-517
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377-2217(09)00395-6
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gérard P. Cachon & Martin A. Lariviere, 1999. "Capacity Allocation Using Past Sales: When to Turn-and-Earn," Management Science, INFORMS, vol. 45(5), pages 685-703, May.
    2. Yunzeng Wang & Yigal Gerchak, 1996. "Periodic Review Production Models with Variable Capacity, Random Yield, and Uncertain Demand," Management Science, INFORMS, vol. 42(1), pages 130-137, January.
    3. Do Ba Khang & Okitsugu Fujiwara, 2000. "Optimality of Myopic Ordering Policies for Inventory Model with Stochastic Supply," Operations Research, INFORMS, vol. 48(1), pages 181-184, February.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    5. Xiangwen Lu & Jing-Sheng Song & Kaijie Zhu, 2008. "Analysis of Perishable-Inventory Systems with Censored Demand Data," Operations Research, INFORMS, vol. 56(4), pages 1034-1038, August.
    6. Xiaomei Ding & Martin L. Puterman & Arnab Bisi, 2002. "The Censored Newsvendor and the Optimal Acquisition of Information," Operations Research, INFORMS, vol. 50(3), pages 517-527, June.
    7. Gallego, Guillermo & Scheller-Wolf, Alan, 2000. "Capacitated inventory problems with fixed order costs: Some optimal policy structure," European Journal of Operational Research, Elsevier, vol. 126(3), pages 603-613, November.
    8. Alain Bensoussan & Metin Çakanyıldırım & Suresh P. Sethi, 2007. "A Multiperiod Newsvendor Problem with Partially Observed Demand," Mathematics of Operations Research, INFORMS, vol. 32(2), pages 322-344, May.
    9. Yossi Aviv & Amit Pazgal, 2005. "A Partially Observed Markov Decision Process for Dynamic Pricing," Management Science, INFORMS, vol. 51(9), pages 1400-1416, September.
    10. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
    11. A. Federgruen & P. Zipkin, 1986. "An Inventory Model with Limited Production Capacity and Uncertain Demands I. The Average-Cost Criterion," Mathematics of Operations Research, INFORMS, vol. 11(2), pages 193-207, May.
    12. Jérémie Gallien & Lawrence M. Wein, 2005. "A Smart Market for Industrial Procurement with Capacity Constraints," Management Science, INFORMS, vol. 51(1), pages 76-91, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Øksendal, Bernt & Sandal, Leif & Ubøe, Jan, 2013. "Stochastic Stackelberg equilibria with applications to time-dependent newsvendor models," Journal of Economic Dynamics and Control, Elsevier, vol. 37(7), pages 1284-1299.
    2. S. Alireza Yavari & S. M. T. Fatemi Ghomi & Fariborz Jolai, 2024. "Development of multi-period, multi-product model to mitigate supply risk with capacity constraint and discount," OPSEARCH, Springer;Operational Research Society of India, vol. 61(4), pages 2285-2311, December.
    3. Qiu, Ruozhen & Sun, Minghe & Lim, Yun Fong, 2017. "Optimizing (s, S) policies for multi-period inventory models with demand distribution uncertainty: Robust dynamic programing approaches," European Journal of Operational Research, Elsevier, vol. 261(3), pages 880-892.
    4. Jingtang Ma & Shan Yang, 2024. "High-dimensional stochastic control models for newsvendor problems and deep learning resolution," Annals of Operations Research, Springer, vol. 339(1), pages 789-811, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Y. Boulaksil & J. C. Fransoo & T. Tan, 2017. "Capacity reservation and utilization for a manufacturer with uncertain capacity and demand," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(3), pages 689-709, July.
    2. Tianhu Deng & Zuo-Jun Max Shen & J. George Shanthikumar, 2014. "Statistical Learning of Service-Dependent Demand in a Multiperiod Newsvendor Setting," Operations Research, INFORMS, vol. 62(5), pages 1064-1076, October.
    3. Mila Nambiar & David Simchi‐Levi & He Wang, 2021. "Dynamic Inventory Allocation with Demand Learning for Seasonal Goods," Production and Operations Management, Production and Operations Management Society, vol. 30(3), pages 750-765, March.
    4. Qi Feng & J. George Shanthikumar, 2018. "Supply and Demand Functions in Inventory Models," Operations Research, INFORMS, vol. 66(1), pages 77-91, 1-2.
    5. Deligiannis, Michalis & Liberopoulos, George & Pandelis, Dimitrios G., 2023. "Managing supply chain risks with dual sourcing: Bayesian learning of censored supply capacity," International Journal of Production Economics, Elsevier, vol. 265(C).
    6. Villa, Sebastián & Castañeda, Jaime Andrés, 2018. "Transshipments in supply chains: A behavioral investigation," European Journal of Operational Research, Elsevier, vol. 269(2), pages 715-729.
    7. Alain Bensoussan & Metin Çakanyıldırım & Suresh P. Sethi, 2009. "Technical Note---A Note on “The Censored Newsvendor and the Optimal Acquisition of Information”," Operations Research, INFORMS, vol. 57(3), pages 791-794, June.
    8. Jian Yang, 2004. "Production Control in the Face of Storable Raw Material, Random Supply, and an Outside Market," Operations Research, INFORMS, vol. 52(2), pages 293-311, April.
    9. Arnab Bisi & Maqbool Dada & Surya Tokdar, 2011. "A Censored-Data Multiperiod Inventory Problem with Newsvendor Demand Distributions," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 525-533, October.
    10. Sari, Kazim, 2010. "Exploring the impacts of radio frequency identification (RFID) technology on supply chain performance," European Journal of Operational Research, Elsevier, vol. 207(1), pages 174-183, November.
    11. A. Bensoussan & M. Çakanyıldırım & J. A. Minjárez-Sosa & A. Royal & S. P. Sethi, 2008. "Inventory Problems with Partially Observed Demands and Lost Sales," Journal of Optimization Theory and Applications, Springer, vol. 136(3), pages 321-340, March.
    12. İsmail Bakal & Nesim Erkip & Refik Güllü, 2011. "Value of supplier’s capacity information in a two-echelon supply chain," Annals of Operations Research, Springer, vol. 191(1), pages 115-135, November.
    13. Philip Kaminsky & Jayashankar M. Swaminathan, 2001. "Utilizing Forecast Band Refinement for Capacitated Production Planning," Manufacturing & Service Operations Management, INFORMS, vol. 3(1), pages 68-81, August.
    14. Gel, Esma S. & Salman, F. Sibel, 2022. "Dynamic ordering decisions with approximate learning of supply yield uncertainty," International Journal of Production Economics, Elsevier, vol. 243(C).
    15. Jian Yang & Zhaoqiong Qin, 2007. "Capacitated Production Control with Virtual Lateral Transshipments," Operations Research, INFORMS, vol. 55(6), pages 1104-1119, December.
    16. Hau L. Lee & V. Padmanabhan & Seungjin Whang, 2004. "Comments on "Information Distortion in a Supply Chain: The Bullwhip Effect"," Management Science, INFORMS, vol. 50(12_supple), pages 1887-1893, December.
    17. Foreest, N. D. van & Wijngaard, J., 2010. "On the Optimal Policy for the Single-product Inventory Problem with Set-up Cost and a Restricted Production Capacity," Research Report 10005, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    18. Yang, Jian & Qi, Xiangtong & Xia, Yusen & Yu, Gang, 2006. "Inventory control with Markovian capacity and the option of order rejection," European Journal of Operational Research, Elsevier, vol. 174(1), pages 622-645, October.
    19. Jingchen Wu & Xiuli Chao, 2014. "Optimal Control of a Brownian Production/Inventory System with Average Cost Criterion," Mathematics of Operations Research, INFORMS, vol. 39(1), pages 163-189, February.
    20. Yefen Chen & Xuanming Su & Xiaobo Zhao, 2012. "Modeling Bounded Rationality in Capacity Allocation Games with the Quantal Response Equilibrium," Management Science, INFORMS, vol. 58(10), pages 1952-1962, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:202:y:2010:i:2:p:502-517. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.