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 . Its 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 youre 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 Valentines 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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ops mgt 19_20_Newsvendor_Spring08-1 - Click to edit Master...

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