A Newsvendor Model with Initial Inventory and Two Salvage Opportunities

Zied Jemai (), Ali Cheaitou, Christian van Delft () and Yves Dallery ()
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Zied Jemai: LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec
Ali Cheaitou: LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec
Christian van Delft: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Yves Dallery: LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec

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Abstract: In this paper, we develop an extension of the newsven-dor model with initial inventory. In addition to the usual quantity ordered at the beginning of the horizon and the usual quantity salvaged at the end of the horizon, we introduce a new decision variable: a salvage opportunity at the beginning of the horizon, which might be used in the case of high initial inventory level. We develop the expression of the optimal policy for this extended model, for a general demand distribution. The structure of this optimal policy is particular and is characterized by two threshold levels. Some managerial insights are given via numerical examples.

Keywords: Newsvendor model; initial inventory; lost sales; salvage opportunities; concave optimisation; threshold levels (search for similar items in EconPapers)
Date: 2010-06-29
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Published in The 6th International Symposium on Management, Engineering and Informatics (MEI), Jun 2010, Orlando, United States

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01672432

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