A general solution for the newsboy model with random order size and possibly a cutoff transaction size

H Shore ()
Additional contact information
H Shore: Ben-Gurion University of the Negev

Journal of the Operational Research Society, 2004, vol. 55, issue 11, 1218-1228

Abstract: Abstract In a recent paper, Dekker et al developed a solution procedure for the newsboy problem with a cutoff transaction size (CTS), such that customers with orders larger than the cutoff value are satisfied in an alternative way, against additional cost. A compound Poisson demand with discrete order sizes is assumed, and a computational procedure developed to identify the optimal solution. In this paper, we discard all distributional assumptions, and, given that order size is random, only the first three moments of the arrival rate and the order size are specified. A general optimal solution is developed, using Shore's piece-wise linear approximations. For cases where a CTS exists, the derived optimal solution is extended to also identify the optimal CTS. The new solution approach requires minimal distributional information, and its merits relative to current approaches are discussed and numerically demonstrated. The new methodology, based on a ‘Calculus of moments’ combined with a distributional approximation, may be easily extended to other computationally intractable problems.

Keywords: calculus of moments; distribution fitting; inventory analysis; newsboy problem; Shore's approximations (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1057/palgrave.jors.2601637 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jorsoc:v:55:y:2004:i:11:d:10.1057_palgrave.jors.2601637

Ordering information: This journal article can be ordered from
http://www.springer. ... search/journal/41274

DOI: 10.1057/palgrave.jors.2601637

Access Statistics for this article

Journal of the Operational Research Society is currently edited by Tom Archibald and Jonathan Crook

More articles in Journal of the Operational Research Society from Palgrave Macmillan, The OR Society
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().