Evaluating Long-Term Service Performance under Short-Term Forecast Updates
Proceedings of the 14th IFAC Symposium on Information Control Problems in Manufacturing, Bucharest, Romania, May 23-25, 2012
8 Pages Posted: 27 Apr 2020
There are 2 versions of this paper
Evaluating Long-Term Service Performance under Short-Term Forecast Updates
Date Written: 2012
Abstract
Managing customer satisfaction in a cost effective way has always been a major challenge faced by inventory managers. We study the problem of a newsvendor selling a perishable product with short-term demand patterns and a long-term service target. The newsvendor determines his long-term order at the first stage, and revises the order according to a short-term forecast update at the second stage. He also evaluates a long-term service target for his overall performance across all possible forecast updates. We characterize his optimal inventory policy that minimizes the expected inventory cost such that the long-term service target is met. Both in-stock rate and fill rate targets are examined.
Keywords: Newsvendor model; in-stock rate; fill rate; long-term service level; demand forecast update
JEL Classification: C61, M11, M20
Suggested Citation: Suggested Citation