Exam 2 Flashcards
What are the 2 objectives of the newsvendor model
minimize the expected total cost, maximize the expected net profit
for non qr The inventory is reviewed on a blank basis
periodic
for non qr there is a blank planning period
single
for non qr the demand is blank, and the underlying probability distribution for the demand is blank
random, known
for non qr the order quantity can be a blank or a blank value depending on the type of random variable that is used to characterize the random demand
continuous, integer
for non qr the system under consideration is a blank item system
single
for non qr the cost and revenue parameters for the period are blank
known
for non qr there is blank fixed cost associated with placing an order
no
for non qr the order delivery time is blank
zero
for non qr shortages are allowed
true
X
random variable that represents the demand in the period
f(x)
probability density function
F(x)
cumulative distribution function of X
Co
unit cost of overage
Cu
unit cost of underage
q
number of units to be ordered prior to the beginning of the period
c(q,X)
the total cost at the end of the period
C(q)
expected cost function
how is the critical ratio derived
Using Leibnitz rule
p
unit selling price
c
unit purchase cost
v
unit salvage revenue
b
unit loss of goodwill
p(q,X)
the total net profit at the end of the period
P(q)
the expected net profit function
what is loss of good will
cost for each unit of unsatisfied demand
Single variable unconstrained optimization problem
true
to guarantee the desired coverage for a discrete random variable, we have to make sure the cumulative distribution value covers the what
critical ratio value
q in backlogging
order-up-to level
T in backlogging
finite horizon length
Xt in backlogging
demand
What are the revenues and costs incurred throughout the planning horizon for backlogging
purchase cost for first period
purchase cost for periods 2 and beyond
sales revenue in periods 1 and on
sales revenue for the last period
expected backordering cost
why does h=Co for backlogging
since we can use the left over units to satisfy the demand in the next period
What are the 2 limitations with the newsvendor model
there is not setup cost for placing an order
the order replenishment is instantaneous
what are the 2 decision variables for stochastic demand
reorder level (when to order)
order size (how much to order)
for qr the inventory level is reviewed on a blank basis
continous
for qr the planning horizon is blank
infinite
for qr the demand is blank and follows a stationary underlying process, the parameters of the process do not change over time
random
for qr the order quantity can be a blank value
continuous
for qr there is a blank lead time for the delivery of an order
positive
for qr the entire order quantity can be delivered at the blank of the lead time
end
for qr the cost and revenue parameters are blank and blank throughout the planning horizon
known and constant
for qr there is a fixed cost with ordering
true
s
safety stock level
both the mean and the variance of the random variable that represents the random demand are scaled by the lead time, which is equivalent to the sum of tau identically and independently distributed random variables
true
extra stock that is maintained to mitigate the risk of shortages dues to uncertainties in supply and demand
safety stock
for modeling purposes what is the safety stock
will be used to describe the on-hand inventory level when an order is delivered
how many units are drawn from the inventory throughout the lead time
this quantity is equal to the demand during lead time
what is the relationship between Ud and lambda Ud
the expected demand per period
observed demand = what
order quantity such that 0<t<T
what happens to f(q) when cost overage increases
f(q) decreases, bc it gets costlier to have too much so you want to stock less
what happens to f(q) when cost of underage decreases
f(q) decreases, because the rate of decrease in the numerator is going to become smaller faster than the rate of decrease in the denominator
