Paper Info
Title
Extended Distribution-Free Newsvendor Models With Demand Updates Using Experts' Judgment
Abstract
Retailers of short lifecycle products, such as life and style goods, are required to commit an order with their suppliers far ahead of their selling seasons using scant demand information. Most of the time, they practice pre-season two-stage single ordering (instants) model that provides an opportunity to modify an initial order based on an updated demand forecast obtained at a later stage. The present paper utilizes expert judgment to assess potential demand impacts of contextual information acquired between two instants to update the initial demand forecast. Additionally, the scant demand information available may not reveal the underlying demand distribution. In this context, we develop inventory models under distribution-free newsvendor setting to determine optimal weight factor and order size, considering the updated demand forecast. The models consider bidirectional demand changes and different cases of demand variability: a constant variance case (CVC), a constant coefficient of variation case (CCVC), and a general case (GC). The models are further extended by subjecting them to constraints for practical considerations and to a multi-item case. The closed-form expressions are presented for the decision variables and the lower bound of expected profit and the results are discussed using numerical examples. The results show economic benefits in revising the demand forecast using expert judgment, the deleterious impact of constraints, and negative role of demand variability. In addition, a real-life case study illustrates an assessment of potential demand impact and the applicability of the proposed models.
Year
DOI
Venue
2021
10.1111/itor.12700
INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH
Keywords
DocType
Volume
two-stage single ordering, newsvendor problem, distribution-free demand, expert judgment, contextual information, multi-item
Journal
28
Issue
ISSN
Citations 
6
0969-6016
0
PageRank 
References 
Authors
0.34
0
3
Name
Order
Citations
PageRank
Madhukar Nagare111.37
Pankaj Dutta2717.04
Naoufel Cheikhrouhou37611.85