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Class14

# 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
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
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
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
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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