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Class14 - Operations Management Class 1 Class 2 Class 3 and...

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11 Operations Management Class 1: Introduction to OM and Process Analysis Class 2: Process Analysis Class 3 and 4: Process Analysis Continued Class 5 and 6: Variability in processes Class 7: Forecasting Class 8: Quality Management, JIT, MRP, and ERP Class 9: Project Management Class 10: Midterm Review Class 11: Scheduling Class 12: Inventory Management: EOQ Model Class 13: Inventory Management: Lead Time and Demand Uncertainty Class 14: Inventory Management: Newsvendor Model
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6/8/10 Content Newsvendor Problem Application of Newsvendor Model Revenue Management Risk Pooling 22
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6/8/10 How much inventory should you hold? Trade-off #1 33 Trade-off #2 Economic Order Quantity (EOQ) Model
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44 The Clever Newsvendor ? ? ? ? ? ? ? Extra Read all about it gfdhg gfhjsg fgdhgs fgashjg oerzjlztrj
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55 Profits Inventory Too much! Too little! Just right! Profit Curve: Newsvendor Problem
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66 Pumpkins Example A shop forecasts that the demand for pumpkins on Halloween is D ≤ 200 with probability 0.5 D ≤ 250 with probability 0.75 D ≤ 300 with probability 0.9 (Note: D is the demand, not the demand rate in EOQ model; and we assume the pumpkins are perishable.) The shop buys pumpkins from a distributor at unit cost c=$2 . The shop sells pumpkins at unit price p=$5 . Any unsold pumpkin has salvage value s=$1 . How many pumpkins should the shop owner buy so that she will
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77 The shop owner considers buying 200 pumpkins Suppose the shop buys one more pumpkins, what is the value of this 201st pumpkin to the shop? » She needs to pay additional unit cost c=$2 » Case 1: D ≤ 200 (prob. 0.5) The shop cannot sell the 201st pumpkin, and gets s=$1 salvage value from it. » Case 2: D > 200 (prob. 0.5) The shop sells the 201st pumpkin at p=$5 . » Value of the 201st pumpkin = 0.5 ° (–$2 + $1) + 0.5 g ($5 – $2) = _________ Pumpkins Example
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88 The shop owner considers buying 300 pumpkins Suppose the shop buys one more pumpkin, what is the value of this 301st pumpkin to the shop? » She needs to pay additional unit cost c=$2 » Case 1: D ≤ 300 (prob. 0.9) The shop cannot sell the 301st pumpkin, and gets s=$1 salvage value from it. » Case 2: D > 300 (prob. 0.1) The shop sells the 301st pumpkin at p=$5 . » Value of the 301st pumpkin = 0.9 ° (–$2 + $1) + 0.1 g ($5 – $2) = ___________ Pumpkins Example
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99 The shop owner considers buying 250 pumpkins Suppose the shop buys one more pumpkin, what is the value of this 251st pumpkin to the shop?
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