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Obtaining Conservative Estimates of Integrated Profitability for a Single-Period Product in an Own-Branding-and-Manufacturing Enterprise with Multiple Owned Channels

Author

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  • Rung-Hung Su

    (Department of Statistics and Information Science, Fu Jen Catholic University, New Taipei City 242062, Taiwan)

  • Chia-Ding Hou

    (Department of Statistics and Information Science, Fu Jen Catholic University, New Taipei City 242062, Taiwan)

  • Jou-Yu Lee

    (Department of Statistics and Information Science, Fu Jen Catholic University, New Taipei City 242062, Taiwan)

Abstract

The achievable capacity index (ACI) is a simple and efficient approach for estimating the profitability of newsboy-type products, wherein profitability is defined as the probability of achieving the target profit by optimizing the order quantity. At present, the ACI is applicable to single retail stores (i.e., single demand) but not to multiple sales channels (i.e., multiple demand). This paper presents an integrated achievable capacity index (IACI) by which to measure the aggregate profitability of multiple mutually independent channels under normally distributed demand. An unbiased IACI estimator is also developed, to which is applied the Taylor expansion to approximate its sampling distribution, wherein the sizes, means, and variances of demand differ in each channel. Furthermore, overestimates due to sampling error are avoided by deriving the lower confidence bound for the IACI. This paper also provides generic tables to aid managers seeking conservative estimates of profitability. The applicability of the proposed scheme is demonstrated numerically using a real-world example involving an own-branding-and-manufacturing (OBM) enterprise with multiple owned channels.

Suggested Citation

  • Rung-Hung Su & Chia-Ding Hou & Jou-Yu Lee, 2024. "Obtaining Conservative Estimates of Integrated Profitability for a Single-Period Product in an Own-Branding-and-Manufacturing Enterprise with Multiple Owned Channels," Mathematics, MDPI, vol. 12(13), pages 1-19, July.
    • Handle: RePEc:gam:jmathe:v:12:y:2024:i:13:p:2080-:d:1427813
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    References listed on IDEAS

    as
    1. Shaojian Qu & Guoqing Jiang & Ying Ji & Guangming Zhang & Nabe Mohamed, 2021. "Newsvendor’s optimal decisions under stochastic demand and cap-and-trade regulation," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(12), pages 17764-17787, December.
    2. Halkos, George & Kevork, Ilias, 2012. "Validity and precision of estimates in the classical newsvendor model with exponential and rayleigh demand," MPRA Paper 36460, University Library of Munich, Germany.
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