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A distribution-free newsvendor problem with nonlinear holding cost

Author

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  • Brojeswar Pal
  • Shib Sankar Sana
  • Kripasindhu Chaudhuri

Abstract

In this paper, we analyse a single-period newsvendor model to determine the optimal order quantity where the customers’ balking occurs.This scenario occurs when the customers are opposed to buy a product for various reasons, such as decreasing quality of product, product is not as good as fresh when it reaches under a threshold level, etc. The model is investigated by assuming that the holding cost function depends on order quantity and the inventory level at which customer balking occurs depends on holding cost. The model allows partial backlogging and permits part of the backlogged shortages to turn into lost sales. We develop the model without taking any specific distributional form of demand, only assuming the mean and the variance of the distribution of demand. Finally, we illustrate the model by numerical examples and compare our distribution-free model with the specific distributional form of demand.

Suggested Citation

  • Brojeswar Pal & Shib Sankar Sana & Kripasindhu Chaudhuri, 2015. "A distribution-free newsvendor problem with nonlinear holding cost," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(7), pages 1269-1277, May.
    • Handle: RePEc:taf:tsysxx:v:46:y:2015:i:7:p:1269-1277
    DOI: 10.1080/00207721.2013.815828
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    Citations

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    Cited by:

    1. Soham Ghosh & Sujay Mukhoti, 2023. "Non-parametric generalised newsvendor model," Annals of Operations Research, Springer, vol. 321(1), pages 241-266, February.
    2. Fakhrabadi, Mahnaz & Sandal, Leif K., 2023. "A Subgame Perfect Approach to a Multi-Period Stackelberg Game with Dynamic, Price-Dependent, Distributional-Robust Demand," Discussion Papers 2023/4, Norwegian School of Economics, Department of Business and Management Science.
    3. Yongho Lee & Taesu Cheong, 2022. "Service Level Constrained Distribution-Free Newsvendor Problem with Balking Penalty," Mathematics, MDPI, vol. 10(14), pages 1-14, July.
    4. Liu, Congzheng & Letchford, Adam N. & Svetunkov, Ivan, 2022. "Newsvendor problems: An integrated method for estimation and optimisation," European Journal of Operational Research, Elsevier, vol. 300(2), pages 590-601.
    5. Irfanullah Khan & Biswajit Sarkar, 2021. "Transfer of Risk in Supply Chain Management with Joint Pricing and Inventory Decision Considering Shortages," Mathematics, MDPI, vol. 9(6), pages 1-20, March.
    6. Bikash Koli Dey & Biswajit Sarkar & Sarla Pareek, 2019. "A Two-Echelon Supply Chain Management With Setup Time and Cost Reduction, Quality Improvement and Variable Production Rate," Mathematics, MDPI, vol. 7(4), pages 1-25, April.

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