Article ID: | iaor20011146 |
Country: | Netherlands |
Volume: | 66 |
Issue: | 3 |
Start Page Number: | 213 |
End Page Number: | 226 |
Publication Date: | Jan 2000 |
Journal: | International Journal of Production Economics |
Authors: | Vairaktarakis George L. |
Keywords: | newsboy problem, economic order |
In this paper we present robust newsboy models with uncertain demand. The traditional approach to describing uncertainty is by means of probability density functions. In this paper we present an alternative approach using deterministic optimization models. We describe uncertainty using two types of demand scenarios; namely interval and discrete scenarios. For interval demand scenarios we only require a lower and an upper bound for the uncertain demand of each item, while for discrete demand scenarios we require a set of likely demand outcomes for each item. Using the above scenarios to describe demand uncertainty, we develop several minimax regret formulations for the multi-item newsboy problem with a budget constraint. For the problems involving interval demand scenarios, we develop linear time optimal algorithms. We show that the corresponding models with discrete demand scenarios are