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

See all articles by Alain Bensoussan

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management

Qi Feng

Purdue University - Krannert School of Management

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Multiple version iconThere are 2 versions of this paper

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

Bensoussan, Alain and Feng, Qi and Sethi, Suresh, Evaluating Long-Term Service Performance under Short-Term Forecast Updates (2012). Proceedings of the 14th IFAC Symposium on Information Control Problems in Manufacturing, Bucharest, Romania, May 23-25, 2012, Available at SSRN: https://ssrn.com/abstract=3566441

Alain Bensoussan

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Rd
SM 30
Richardson, TX 75080-3021
United States
9728836117 (Phone)

HOME PAGE: http://www.utdallas.edu/~axb046100/

Qi Feng

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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