Sensitivity Analysis of the Newsboy Model
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.
|Date of creation:||23 Sep 2013|
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- Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
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- Louis Eeckhoudt & Christian Gollier & Harris Schlesinger, 1995. "The Risk-Averse (and Prudent) Newsboy," Management Science, INFORMS, vol. 41(5), pages 786-794, May.
- Chen, Liang-Hsuan & Chen, Ying-Che, 2010. "A multiple-item budget-constraint newsboy problem with a reservation policy," Omega, Elsevier, vol. 38(6), pages 431-439, December.
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- Yu-Sheng Zheng, 1992. "On Properties of Stochastic Inventory Systems," Management Science, INFORMS, vol. 38(1), pages 87-103, January.
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