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Fuzzy Gaussian mixture optimisation of the newsvendor problem: mixing fuzzy perception and randomness of customer demand

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  • Farzad Fathizadeh
  • Jean Savinien
  • Yacine Rekik

Abstract

Motivated by the increasing exposition of decision makers to both statistical and judgemental based sources of demand information, we develop in this paper a fuzzy Gaussian Mixture Model (GMM) for the newsvendor permitting to mix probabilistic inputs with a subjective weight modelled as a fuzzy number. The developed framework can model for instance situations where sales are impacted by customers sensitive to online review feedback or expert opinions. It can also model situations where a marketing campaign leads to different stochastic alternatives for the demand with a fuzzy weight. Thanks to a tractable mathematical application of the fuzzy machinery on the newsvendor problem, we derived the optimal ordering strategy taking into account both probabilistic and fuzzy components of the demand. We show that the fuzzy GMM can be rewritten as a classical newsvendor problem with an associated density function involving these stochastic and fuzzy components of the demand. The developed model enables to relax the single modality of the demand distribution usually used in the newsvendor literature and to encode the risk attitude of the decision maker.

Suggested Citation

  • Farzad Fathizadeh & Jean Savinien & Yacine Rekik, 2023. "Fuzzy Gaussian mixture optimisation of the newsvendor problem: mixing fuzzy perception and randomness of customer demand," International Journal of Production Research, Taylor & Francis Journals, vol. 61(10), pages 3459-3480, May.
    • Handle: RePEc:taf:tprsxx:v:61:y:2023:i:10:p:3459-3480
    DOI: 10.1080/00207543.2022.2085209
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