Multi-product selective newsvendor problem with service level constraints and market selection flexibility

Abstract

We consider a multi-product multi-market newsvendor problem where the decision-maker could select some markets to serve. The considered problem involves the integration of procurement and market selection decisions. The products are procured from an external supplier. We assume that the realised demand for each product should be satisfied. In the case of shortages, the firm procures items at a higher cost. The paper considers the case where the selling prices, market entry costs, and product demand distributions are market dependent. Specifically, we discuss three cases of the Multi-Product Selective Newsvendor Problem: flexible market entry case, full market entry case and partial market entry case. The mathematical models of the above cases result in binary nonlinear programmes. We develop solution algorithms for solving the resulting combinatorial problems. Some managerial insights are provided.