Optimal inventory control in a multi-period newsvendor problem with non-stationary demand

Gitae Kim, Kan Wu, Edward Huang*

*Corresponding author for this work

Research output: Contribution to journalJournal Article peer-review

47 Scopus citations

Abstract

The optimal control of inventory in supply chains plays a key role in the competiveness of a corporation. The inventory cost can account for half of company's logistics cost. The classical inventory models, e.g., newsvendor and EOQ models, assume either a single or infinite planning periods. However, these models may not be applied to perishable products which usually have a certain shelf life. To optimize the total logistic cost for perishable products, this paper presents a multi-period newsvendor model, and the problem is formulated as a multi-stage stochastic programming model with integer recourse decisions. We extend the progressive hedging method to solve the model efficiently. A numerical example and its sensitivity analysis are demonstrated.

Original languageEnglish
Pages (from-to)139-145
Number of pages7
JournalAdvanced Engineering Informatics
Volume29
Issue number1
DOIs
StatePublished - 01 2015
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2014 Elsevier Ltd. All rights reserved.

Keywords

  • Inventory models
  • Multi-stage stochastic programming
  • Newsvendor models
  • Progressive hedging methods

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