The news vendor model: A dynamic policy for infinite-horizon inventory analysis
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We consider two ends of the inventory planning horizon: (i) the single-period or newsvendor problem, and (ii) a class of single-product infinite horizon problems with stationary, stochastic demand. We present an intimate relationship between these models, despite differences in the model assumptions. Several authors have developed this relationship in some form; we review past contributions and extend them by providing insights and policies that simplify inventory control. We consider these relationships in the presence of both unit stockout costs and a fixed charge per stockout occasion. The former case provides simple, appealing results, while the latter extends the assumptions of the newsvendor model. We provide an estimate of an upper bound on cost difference between the policies presented and the best-known policies, based on cost parameters. We show the validity of this bound under reasonable parameter assumptions in an extended version of this paper.
DECISION SCIENCES INSTITUTE, 1997 ANNUAL MEETING, PROCEEDINGS, VOLS 1-3
author list (cited authors)
Geunes, J. P., & Hayya, J. C.
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