A distribution-free newsvendor problem with nonlinear holding cost

In this paper, we analyse a single-period newsvendor model to determine the optimal order quantity where the customers' balking occurs.This scenario occurs when the customers are opposed to buy a product for various reasons, such as decreasing quality of product, product is not as good as fresh...

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Bibliographic Details
Published inInternational journal of systems science Vol. 46; no. 7; pp. 1269 - 1277
Main Authors Pal, Brojeswar, Sana, Shib Sankar, Chaudhuri, Kripasindhu
Format Journal Article
LanguageEnglish
Published Taylor & Francis 19.05.2015
Subjects
customer balking
Customers
Demand
distribution free
Inventories
Mathematical models
newsvendor model
Nonlinearity
Optimization
partial backlogging
Shortages
Stockpiling
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Summary:In this paper, we analyse a single-period newsvendor model to determine the optimal order quantity where the customers' balking occurs.This scenario occurs when the customers are opposed to buy a product for various reasons, such as decreasing quality of product, product is not as good as fresh when it reaches under a threshold level, etc. The model is investigated by assuming that the holding cost function depends on order quantity and the inventory level at which customer balking occurs depends on holding cost. The model allows partial backlogging and permits part of the backlogged shortages to turn into lost sales. We develop the model without taking any specific distributional form of demand, only assuming the mean and the variance of the distribution of demand. Finally, we illustrate the model by numerical examples and compare our distribution-free model with the specific distributional form of demand.
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content type line 23
ISSN:0020-7721
1464-5319
DOI:10.1080/00207721.2013.815828