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On the Newsboy Model with a Cutoff Transaction Size

Author

Listed:
  • R. Dekker
  • J.B.G. Frenk
  • M.J. Kleijn

    (Erasmus University Rotterdam)

  • A.G. de Kok

    (Eindhoven University of Technology)

Abstract

In this paper we analyse the effect of satisfying in a different way customers with an order larger than a prespecified cutoff transaction size, in a simple newsboy setting.For compound Poisson demand with discrete order sizes, we show how to determine the expected costs and the optimal cutoff transaction size. Moreover, by approximating the distribution of the total demand during a period by the normal distribution one can determine an expression for the average costfunction that depends on the cutoff transaction size only. A main advantage of this approximation is that the computational effort is much less. The quality of using the normal approximation is evaluated through a number of numerical experiments, which show that the approximative results are satisfactory.

Suggested Citation

  • R. Dekker & J.B.G. Frenk & M.J. Kleijn & A.G. de Kok, 1997. "On the Newsboy Model with a Cutoff Transaction Size," Tinbergen Institute Discussion Papers 97-113/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19970113
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    References listed on IDEAS

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    1. Kleijn, M.J. & Dekker, R., 1997. "Using break quantities for tactical optimisation in multistage distribution systems," Econometric Institute Research Papers EI 9737/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. Matz, Aw, 1983. "The shop counter maximum issue problem," Omega, Elsevier, vol. 11(1), pages 75-79.
    3. Andrew J. Clark & Herbert Scarf, 2004. "Optimal Policies for a Multi-Echelon Inventory Problem," Management Science, INFORMS, vol. 50(12_supple), pages 1782-1790, December.
    4. W. Popp, 1965. "Simple And Combined Inventory Policies, Production to Stock or to Order?," Management Science, INFORMS, vol. 11(9), pages 868-873, July.
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    Cited by:

    1. Chin-Tsai Lin & Hui-Yin Tsai, 2004. "A Note on the Newsboy Model with a Cutoff Transaction Size and Gauss Holding and Penalty Cost Functions," Quality & Quantity: International Journal of Methodology, Springer, vol. 38(2), pages 173-184, April.
    2. Marcel J. Kleijn & Rommert Dekker, 1997. "Using Break Quantities for Tactical Optimisation in Multistage Distribution Systems," Tinbergen Institute Discussion Papers 97-094/4, Tinbergen Institute.

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