ops mgt 19_20_Newsvendor_Spring08-1

# ops mgt 19_20_Newsvendor_Spring08-1 - Click to edit Master...

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Unformatted text preview: Click to edit Master subtitle style MANAGING INVENTORY IN THE FACE OF UNCERTAINTY The Newsvendor Problem MGT3501 You are the GaTech Barnes & Noble Merchandise Buyer #BB12 - Final Four tee 100% cotton -shirt with Final Four logo \$21.98 . It’s Sunday, March 28, 2004. The Jackets just made it to the Final Four. Before heading out to celebrate, you need to call your T-shirt supplier and order Final Four merchandise. How many do you order? The Newsvendor Framework • One chance to decide on the stocking quantity for the product you’re selling • Demand for the product is uncertain • Known marginal profit for each unit sold and known marginal loss for the ones that are bought and not sold • Goal: Maximize expected profit Examples where the Newsvendor framework is appropriate • Perishable goods – Meals in a cafeteria – Dairy foods • Short selling season – Christmas trees, toys – Flowers on Valentine’s day – Fashion clothes, seasonal clothes – Newspapers The Newsvendor Problem • Newsvendor selling the AJC • Sells the papers for \$1.00 • Buys them for 70 cents • Leftover papers sold at discount: 20 cents each. • He will definitely have at least 35 customers, but no more than 40: – 35 customers with probability 0.10 – 36 customers with probability 0.15 – 37 customers with probability 0.25 – 38 customers with probability 0.25 – 39 customers with probability 0.15 – 40 customers with probability 0.1 Marginal analysis x Probabili- ty that demand = x P = Prob. of selling the xth unit (1-P)=Prob....
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## This note was uploaded on 01/25/2011 for the course MGT 3501 taught by Professor Chang during the Spring '10 term at Georgia Tech.

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ops mgt 19_20_Newsvendor_Spring08-1 - Click to edit Master...

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