Newsvendor

Inventory Inventory is the goods that a business has on its premises or on consignment. The essential role of inventory is to act as a buffer, allowing for the smooth functioning of the production and order fulfillment processes. Inventory Control Inventory control is the processes employed to maximize a company's use of inventory. The goal of inventory control is to generate the maximum profit from the least amount of inventory investment without intruding upon customer satisfaction levels.

In Star Trek, if you ask Mr. Spock a question, he will give you a logical answer based on scientific evidence and probabilities. He is a rational character and makes emotionless decisions without being affected by irrelevant information. But we humans are not as calm as Mr. Spock; a single piece of irrelevant information could impact our behavior. For example, Nobel laureate Richard Thaler (2015) notes that students were happier after he raised their exam scores range from [0 to 100] to [0 to 137]

1. a. The simulation indicates that 584 is the optimum stocking quantity. Daily profit at this stocking quantity is $331.4346. b. Using the newsvendor model, Cu = 1 - 0.2 = 0.8 and Co = .2. Cu /(Cu + Co) = .8. Using the spreadsheet, we found Q* = NORM.INV(.8,500,100) = 584.16. The simulation and newsvendor model give the same optimal stocking quantity. 2. a. According to the simulation spreadsheet, 4 hours of investment in creation maximizes daily profit at $371.33. b. Sheen would choose an

electronic copy (typed answers are preferred). Show your work clearly and explain your reasoning in detail. You will not receive a credit if the instructor cannot understand what you have done because of insufficient explanation. (Q1-Q2) Teddy Bower the Newsvendor (To answer these two questions, use the Standard Normal Distribution Function Table; one of the purposes of these questions is to give you a hands-on experience in using the table, which you will need to do in the final

employment opportunities in Hamptonshire) to be $10 per hour. Try different values for h in the spreadsheet “Hamptonshire Express: Problem #2.” (To make your life easier, optimal stocking quantity, Q, is computed by the spreadsheet based on the newsvendor formula for your choice of h .) b. What explains Sheen’s choice of effort level h ? Do not spend more than 10 minutes thinking about this question. (Hint: Sheen would choose h to equate marginal cost of effort with marginal benefit. The

Using the function provided, the optimal stocking quantity, which maximizes expected profit, is approximately 584 newspapers. If 584 newspapers were to be ordered, Hamptonshire Express will net an expected profit of $331.436 per day. b. Using the Newsvendor Formula in Excel, or Q* = Norminv(Cu/(Cu+Co), Mean, Std Dev) and the values: Cu = 1 - .2 = .8 Co = .2 Mean = 500 Std Dev = 100 Q* = 584.1621 or 584 newspapers. This verifies the quantity in part (a). Problem 2 a. Based on the simulation, Anna can

Newsvendor Model Chapter 9 1 utdallas.edu/~metin Learning Goals  Determine the optimal level of product availability – Demand forecasting – Profit maximization  Other measures such as a fill rate utdallas.edu/~metin 2 O‟Neill‟s Hammer 3/2 wetsuit utdallas.edu/~metin 3 Hammer 3/2 timeline and economics Generate forecast of demand and submit an order to TEC Economics: • • • Each suit sells for p = $180 TEC charges c = $110/suit Discounted suits sell for

Specific planning problem and solution approach Dell management was concerned that, although the firm carried almost no inventory, its suppliers might be holding much more inventory than was needed to provide desired customer service. For this reason, Dell asked a team from the Tauber Manufacturing Institute (TMI), a partnership between the engineering and business schools at the University of Michigan, to study this issue. Dell sought recommendations for a sustainable process and decision-support

MANAGING THE BULLWHIP EFFECT Joseph H. Wilck, IV Ph.D. Dual Degree, Industrial Engineering and Operations Research, College of Engineering The bullwhip effect is the inherent increase in demand fluctuation up the supply chain (i.e., away from customer). Managing the bullwhip effect is minimizing the fluctuation and variation of the demand (i.e., orders from one stage of a supply chain to the next stage of the supply chain) throughout the supply chain. This paper will offer a literature

Arjun R. Sabhaya Production 529 Hamptonshire Express October 16, 2012 PROBLEM #1 A. The simulated function given in the Excel spreadsheet “Hamptonshire Express: Problem_#1” allows the user to find the optimal quantity of newspapers to be stocked at the newly formed Hamptonshire Express Daily Newspaper. Anna Sheen estimated the daily demand of newspapers to be on a normal standard distribution; stating that daily demand will have a mean of 500 newspapers per day with a standard deviation