What is Newsvendor Problem?
The newsvendor problem is to make a single-period procurement decision of a single product under stochastic demand
Newsvendor Framework:
- One chance to decide on the stocking quantity of the product
- Demand for the product is uncertain
- Known marginal profit for each unit sold and known marginal loss for the ones that are bought and not sold
- Goal : Maximize expected profit
Examples where the Newsvendor Framework is appropriate:
- Perishable Goods
- Meals in a Cafeteria
- Dairy foods
- Short selling season
- Christmas trees, toys
- Flowers on Valentine's day
- Fashion clothes, seasonal clothes
- Newspaper