Newsvendor games: convex optimization of centralized inventory operations

• Samuel Burer ^[1] ; Moshe Dror ^[2]
  1. [1] University of Iowa

     University of Iowa

     City of Iowa City, Estados Unidos

     
  2. [2] University of Arizona

     University of Arizona

     Estados Unidos

     
• Localización: Top, ISSN-e 1863-8279, ISSN 1134-5764, Vol. 20, Nº. 3, 2012, págs. 707-728
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • A finite set of outlets with randomly fluctuating demands bands together to reduce costs by buying, storing and distributing their inventory jointly. This is termed inventory centralization and is a type of risk pooling. The expected centralization cost can be lowered even further, without disrupting the demand behavior at individual outlets, by inducing the outlets to correlate their individual demands. Given that the outlets’ demands are normally distributed, the lowering of the centralized cost corresponds to a semidefinite optimization problem. This paper establishes a closed-form optimal solution of the semidefinite program and a fair allocation of the centralized cost at optimality.