lec3 - IE221: Operations Research Probabilistic Methods...

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1 Tue, 4 Sep 2000 IE221: Lecture 3 1 IE221: Operations Research – Probabilistic Methods Module I: Inventory Models Lecture 3, Fall 2001 Lehigh University IMSE Department Tue, 4 Sep 2000 IE221: Lecture 3 2 Lecture 3 Outline The News Vendor Problems n Single Period Models n Marginal Analysis n Optimal Order Qty n Continuous Demand n Example: Airline Yield Management Photo by Bruce Takeo Akizuki
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2 Tue, 4 Sep 2000 IE221: Lecture 3 3 Classification of IMs Inventory Models are CLASSIFIED by: n whether the demand for a period is known (deterministic or probabilistic) n the way inventory is reviewed (continuous or periodic) Tue, 4 Sep 2000 IE221: Lecture 3 4 The News Vendor Problem n Determine q, number of newspapers to order. n Demand is random variable, D. P(D=d)=p d . n Cost incurred is c(d,q). Over-stocking: excess newspapers worthless. Understocking: profits lost. What is the type of review and demand for News Vendor Problems?
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3 Tue, 4 Sep 2000 IE221: Lecture 3 5 Single-Period Decision Models
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lec3 - IE221: Operations Research Probabilistic Methods...

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