Note: Optimal Ordering Decisions with Uncertain Cost and Demand Forecast Updating
We determine the optimal ordering policy for a retailer who has two instants to order a seasonal product from a manufacturer prior to a single selling season. While the demand is uncertain, the retailer can improve the forecast by utilizing the market signals observed between the first and second instants. However, because of the nature of the manufacturing environment, the unit cost at the second instant is uncertain and could be higher (or lower) than the unit cost at the first instant. To determine the profit-maximizing ordering strategies at both instants, the retailer has to evaluate the trade-off between a more accurate forecast and a potentially higher unit cost at the second instant. We present a nested newsvendor model for determining the optimal order quantity at each instant and characterize the conditions under which it is optimal for the retailer to delay its order until the second instant.
Volume (Year): 45 (1999)
Issue (Month): 10 (October)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Panagiotis Kouvelis & Genaro J. Gutierrez, 1997. "The Newsvendor Problem in a Global Market: Optimal Centralized and Decentralized Control Policies for a Two-Market Stochastic Inventory System," Management Science, INFORMS, vol. 43(5), pages 571-585, May.
- Gary D. Eppen & Ananth. V. Iyer, 1997. "Backup Agreements in Fashion Buying---The Value of Upstream Flexibility," Management Science, INFORMS, vol. 43(11), pages 1469-1484, November.
- Ananth. V. Iyer & Mark E. Bergen, 1997. "Quick Response in Manufacturer-Retailer Channels," Management Science, INFORMS, vol. 43(4), pages 559-570, April.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:45:y:1999:i:10:p:1456-1462. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.