Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85448
Authors: 
Dekker, R.
Frenk, J.B.G.
Kleijn, M.J.
de Kok, A.G.
Year of Publication: 
1997
Series/Report no.: 
Tinbergen Institute Discussion Paper 97-113/4
Abstract: 
In this paper we analyse the effect of satisfying in a different way customers with an order larger than a prespecified cutoff transaction size, in a simple newsboy setting.For compound Poisson demand with discrete order sizes, we show how to determine the expected costs and the optimal cutoff transaction size. Moreover, by approximating the distribution of the total demand during a period by the normal distribution one can determine an expression for the average costfunction that depends on the cutoff transaction size only. A main advantage of this approximation is that the computational effort is much less. The quality of using the normal approximation is evaluated through a number of numerical experiments, which show that the approximative results are satisfactory.
Subjects: 
Inventory
cutoff transaction size
newsboy model
Document Type: 
Working Paper

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