Document RAIRO Oper. Res. 41 (2007) 455-464
DOI: 10.1051/ro:2007031
Newsvendor solutions with general random yield distributions
Scott E. Grasman1, Zaki Sari2 and Tewfik Sari31 219 EMSE, University of Missouri - Rolla, Rolla, Missouri 65409-0370, USA; grasmans@umr.edu
2 Laboratoire d'Automatique de Tlemcen, Faculté des Sciences de l'Ingénieur, Université Abou Bekr Belkaïd de Tlemcen, Algeria; z_sari@univ-tlemcen.edu
3 Mathematics, University of Mulhouse, France; t.sari@uha.fr
(Received October 9, 2005. Accepted May 25, 2007. Published online 11 October 2007.)
Abstract
Most systems are characterized by uncertainties that cause throughput to be highly variable, for example, many modern production processes and services are substantially affected by random yields. When yield is random, not only is the usable quantity uncertain, but the random yield reduces usable capacity and throughput in the system. For these reasons, strategies are needed that incorporate random yield. This paper presents the analysis of the newsvendor model with a general random yield distribution, including the derivation of the optimal order quantity. Results are shown to converge to the basic newsvendor model for the case of perfect yield, and are further demonstrated using the case of general multiplicative random yield. Results have significant impact on both manufacturing and service sectors since the newsvendor model applies to many real-world situations.
Mathematics Subject Classification. 90B
Key words: Newsvendor model, operations management, planning and control, random yield
© EDP Sciences, ROADEF, SMAI 2007