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The distribution-free newsboy problem with resalable returns

Author

Listed:
  • Mostard, J.
  • Teunter, R.H.
  • de Koster, M.B.M.

Abstract

We study the case of a catalogue/internet mail order retailer selling seasonal products and receiving large numbers of commercial returns. Returned products arriving before the end of the selling season can be resold if there is sufficient demand. A single order is placed before the season starts. Excess inventory at the end of the season is salvaged and all demands not met directly are lost. Since little historical information is available, it is impossible to determine the shape of the distribution of demand. Therefore, we analyze the distribution-free newsboy problem with returns, in which only the mean and variance of demand are assumed to be known. We derive a simple closed-form expression for the distribution-free order quantity, which we compare to the optimal order quantities when gross demand is assumed to be normal, lognormal or uniform. We find that the distribution-free order rule performs well in most realistic cases.

Suggested Citation

  • Mostard, J. & Teunter, R.H. & de Koster, M.B.M., 2003. "The distribution-free newsboy problem with resalable returns," ERIM Report Series Research in Management ERS-2003-068-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:975
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    References listed on IDEAS

    as
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    8. Mostard, J. & Teunter, R.H., 2002. "The Newsboy Problem with Resalable Returns," ERIM Report Series Research in Management ERS-2002-89-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    distribution-free newsboy problem; inventory; product returns;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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