Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 1997-11-08
Number: 97-113/4
Author-Name: R. Dekker
Author-Email: rdekker@few.eur.nl
Author-Name: J.B.G. Frenk
Author-Email: frenk@few.eur.nl
Author-Name: M.J. Kleijn
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: A.G. de Kok
Author-Workplace-Name: Eindhoven University of Technology
Title: On the Newsboy Model with a Cutoff Transaction Size
Abstract: In this paper we analyse the effect of satisfying in a different way customers with an order larger than a prespecified cutoff transaction size, in a simple newsboy setting.For compound Poisson demand with discrete order sizes, we show how to determine the expected costs and the optimal cutoff transaction size. Moreover, by approximating the distribution of the total demand during a period by the normal distribution one can determine an expression for the average costfunction that depends on the cutoff transaction size only. A main advantage of this approximation is that the computational effort is much less. The quality of using the normal approximation is evaluated through a number of numerical experiments, which show that the approximative results are satisfactory.
Keywords: Inventory; cutoff transaction size; newsboy model
File-Url: https://papers.tinbergen.nl/97113.pdf
File-Format: application/pdf
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Handle: RePEc:tin:wpaper:19970113