Newsboy Problem

# Single-period Inventory Analysis:Economic Ordering Quantity for Seasonal Items

This site is a part of the JavaScript E-labs learning objects for decision making. Other JavaScript in this series are categorized under different areas of applications in the MENU section on this page.

Professor Hossein Arsham

Often managers have to make decisions about inventory level over a very limited period, This is the case, for example with seasonal goods such as Christmas cards that should satisfy all demand in December, but any cards left in January have almost no value. These single-period decision models are phrased as the Newsboy Problem. For a newsboy who sells papers on a street corner, the demand is uncertain, and the newsboy must decide how many papers to buy from his supplier. If he buys too many papers he is left with unsold papers that have no value at the end of the day; if he buys too few papers he has lost the opportunity of making a higher profit.

This JavaScript computes the optimal inventory level over a single cycle. For other inventory management tools visit the inventory control models site.

Enter up-to-28 pairs of (number of possible item to sell, and their associated non-zero probabilities), together with the "not sold unit batch cost", and the "net profit of a batch sold" in the data-matrix, THEN click the Calculate button. Together with the "not sold unit batch cost", and the "net profit of a batch sold" Blank boxes are not included in the calculations.

In entering your data to move from cell to cell in the data-matrix use the Tab key not arrow or enter keys.

To edit your data, including add/change/delete, you do not have to click on the "clear" button, and re-enter your data all over again. You may simply add a pair of numbers to any blank cells, change a number to another in the same cell, or delete a number from a cell. After editing, then click the "calculate" button.

For extensive edit or to use the JavaScript for a new set of data, then use the "clear" button.

This JavaScript, like many others works well for decision problems having nontrivial parameter, such as non-zero probabilities. The solution for such cases is obvious. For example, if number of batches are 0 or 1, with probabilities 1, and zero. Moreover, not sold unit batch cost, say 1, and the net profit of a batch sold is also 1, then the optimal ordering quantity is 0, which is an obvious case.

 Number of Batches Probability of Selling Number of Batches Probability of Selling Not Sold Unit Batch Cost: Net Profit of a Batch Sold: The Optimal Ordering Quantity Is:

For Technical Details, Back to:
Decision Making in Economics and Finance

Professor Hossein Arsham

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Professor Hossein Arsham

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