Abstract
The newsvendor model deals with a single-period capacity allocation problem under uncertainty. The real world examples include perishable products (e.g., fish, vegetable), holiday-related products (e.g., Easter, Christmas, Halloween), seasonal products (e.g., fashion), and promotional products. This section addresses three newsvendor models: traditional newsvendor, inverse newsvendor, and sequential newsvendor models. The main decision under the traditional newsvendor setting is capacity allocation (i.e., how much to order), whereas the main decision under the inverse newsvendor setting is demand allocation (i.e., how many customers to be served) under the fixed capacity. This section demonstrates how to compare profit maximization approach to customer-oriented approach under the traditional newsvendor. The inverse newsvendor applies to revenue management for the hospitality industry. The sequential newsvendor model determines the optimal sequence when the number of customers to be served (determined by the inverse newsvendor model) is given. Normal distribution is considered for analytical solution and numerical studies. In addition, a discrete distribution is considered for numerical studies.
Highlights
How can an operations manager make a one-time decision that covers a fixed future period if the manager cannot adjust the decision afterwards? A typical approach to this question is the single-period newsvendor model [1–4]
The inverse newsvendor model applies to revenue management, which deals with fixed capacity and has to determine demand allocation [7, 8, 10, 11]
The inverse newsvendor model applies to the strategic level decision, e.g., how many customers should be allocated in a fixed capacity
Summary
How can an operations manager make a one-time decision that covers a fixed future period if the manager cannot adjust the decision afterwards? A typical approach to this question is the single-period newsvendor model [1–4]. Decision Making products (e.g., Christmas, Easter, Halloween), seasonal products (e.g., fashion), and promotional products (e.g., T-shirts for a championship basketball or football game) [3] These products have a single selling period and will be deeply discounted after the selling season. If the newsvendor orders too much, left-over (overage) inventory is salvaged or steeply discounted. [5, 6] address the multi-item newsvendor model for inventory optimization problem with a capacity constraint. The main decision variable for the traditional newsvendor is how many orders to be placed, which is a capacity allocation problem. The newsvendor can make decision on demand size to take full advantage of capacity [7–11]. The inverse newsvendor would like to keep balance between overusage and underusage.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
