Multi-product newsboy problem with limited capacity and outsourcing

Abstract

This paper considers a multi-product newsboy system that produces multiple products for fulfilling independently uncertain demands, which share the same production capacity. To deal with possible shortage of limited capacity, productions can be outsourced. We consider two outsourcing strategies: zero lead time outsourcing, and nonzero lead time outsourcing. The structural properties and solution procedures for the profit-maximization models are developed. Numerical results are provided for obtaining some managerial insights.