{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

MBPFC7 Newsvendor

MBPFC7 Newsvendor - Chapter 7 7.3 Optimal Service Level The...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 7 7.3 Optimal Service Level: The Newsvendor Problem Fashion goods Short product life cycle of a few months 1 or 2 buying opportunities Perishable items GOAL Determine optimal order quantity
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Newsvendor Problem Decision making under uncertainty Balance expected cost of too much With expected cost of too little ROLE of uncertainty No scale economies
Image of page 2
3 Example 7.5 Big George is an electronics superstore. It sells consumer electronics. Big is considering carrying a plasma HDTV for Christmas sales. Each HDTV sells for $2,500. Big George purchases each unit for $1,800. Unsold TVs can be salvaged for $1,700. Estimated demand is between 100 and 200 with probability weights given in the table. How many HDTVs should Big George purchase for the season’s sales?
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Table 7.3 Demand for HDTV at Big George Demand r Probability (R=r) 100 0.02 110 0.05 120 0.08 130 0.09 140 0.11 150 0.16 160 0.20 170 0.15 180 0.08 190 0.05 200 0.01 R= uncertain demand R can take the values shown as r
Image of page 4
Table 7.3 Demand for HDTV at Big George Demand r Probability (R=r) Cumulative Prob Prob(R≤ r) 100 0.02 0.02 110 0.05 0.07 120 0.08 0.15 130 0.09 0.24 140 0.11 0.35 150 0.16 0.51 160 0.20 0.71 170 0.15 0.86 180 0.08 0.94 190 0.05 0.99 200 0.01 1 Probability that R will be less than or equal to particular value of r For example, the cumulative probability that demand will be less than or equal to 130 is 0.24
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Table 7.3 Demand for HDTV at Big George Demand r Probability (R=r) Cumulative Prob Prob(R≤ r) Complementary Cumulative Probability Prob(R > r) 100 0.02 0.02 0.98 110 0.05 0.07 0.93 120 0.08 0.15 0.85 130 0.09 0.24 0.76 140 0.11 0.35 0.65 150 0.16
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern