Authors: Hamdjatou Kane, Pierre Baptiste
Addresses: Departement des Sciences Administratives, Universite du Quebec en Outaouais, 101, rue Saint-Jean-Bosco, C.P. 1250 Succ. Hull, Gatineau (Quebec), J8X 3X7, Canada. ' Departement de Mathematiques et de Genie Industriel, Ecole Polytechnique de Montreal, C.P. 6079 Succ. Centre-ville, Montreal (Quebec) H3C 3A7, Canada
Abstract: This paper deals with the newsboy problem and proposes a pedagogical approach for its teaching in engineer and business schools. In most cases, one studies the optimal order quantity that maximises the expected revenue. In some cases, one determines the expected cost itself, but never the associated risk. In this paper, we study the standard deviation of the expected cost for two classical models (including or not salvage revenue) and for three classical distributions (normal, uniform and exponential). The formulas can be drawn with any spreadsheet program and the student can evaluate the expected revenue and the risk associated with any ordering value. To illustrate the proposed formulas, numerical examples are given.
Keywords: inventories; newsboy problem; risk management; single-periods; inventory control; pedagogical approaches; pedagogy; engineering schools; business schools; universities; higher education; teaching; optimal order quantities; expected revenues; revenue maximisation; expected costs; associated risks; standard deviation; salvage revenue; classical distributions; normal distribution; uniform distribution; exponential distribution; formulas; spreadsheets; evaluation; ordering values; services operations; services management; informatics; logistics.
International Journal of Services Operations and Informatics, 2011 Vol.6 No.1/2, pp.86 - 105
Published online: 28 Jan 2011 *Full-text access for editors Access for subscribers Purchase this article Comment on this article