Newsvendor model with normally distributed demand

Inputs are in red, outputs in black

Mean demand, m : 1000
Standard deviation of demand, s : 250

Optimal Order Quantity Performance Measures

Overage penalty, Co : 6 Order quantity, Q :
Underage penalty, Cu : 8 Standard Normal order quantity, z :
Critical ratio: Cu / (Co + Cu) 0.5714 Expected Lost Sales, L(Q) :
z-score 0.500 Expected Sales, S(Q) :
Q 1000 Expected Left Over Inventory, V(Q) :
Fill rate, f :
Order quantity to achieve a target in-stock probability Stockout probability:
Target in-stock 0.9500
z-score 1.64 Overage penalty, Co :
Q 1411 Underage penalty, Cu :
Expected profit
Order Quantity to achieve a target fill rate Maximum profit
Target fill rate 99% Mismatch cost
Target lost sales 0.04
z #NAME?
Q #NAME?

Expected lost sales = std.dev * L(z)

Expected sales = mu - Expected lost sales
mu= expected demand
 Supplier Cost 50 50 50
Supplier sells at 125 125 125
Supplier buys back at 0 20 50
Supplier Sells at 0 10 10
Order Qty 5330 5480 5795
Expected Sales 4552.1 4611.2 4717
1000 Returns 777.9 868.8 1078
0.00 supplier's profit 399750 402312 391505
100 Zara's expected profit 699380 715736 744612
921 expected supply chain p 1099130 1118048 1136117
79
92.10%
50.00%

6
8
6894
8000.00 product A product B
1271.88 C C
P P
ORDER ORDER
0.75C HC=.2C

A/F P-C/C-.75C P-C/1.2C

P-C/.25C
pected lost sales
Case 1 : Stores sales Case 2 : total sales

Model : ARIMA(0,1,2)(1,1,0)[12] Model : ARIMA(0,1,1)(1,1,0)[

coeff coeff
ma1 -0.348 ma1
sar1 -0.6375 sar1

AIC 569.58 AIC

BIC 576.98 BIC

forecast for next 3 months forecast for next 3 months

month 1 1218 month 1
month 2 1234 month 2
month 3 1786 month 3

The MA coefficient (ma1)

The seasonal SAR coeffici
total sales Case 3 : market Share

Model : ARIMA(0,1,1)(1,1,0)[12] Model : ARIMA(0,0,0) with non-zero mean

No coefficients here
-0.2702
-0.4785

718.9 AIC -534.37

724.45 BIC -530.18

forecast for next 3 months forecast for next 3 months

10014 month 1 0.122
10401 month 2 0.119
13836 month 3 0.129

The MA coefficient (ma1) represents the impact of the moving average term on the current observation.
The seasonal SAR coefficient (SAR) captures any seasonal patterns in the data.
Lower AIC and BIC values indicate better model fit. These are indicator for best model
Newsvendor model with Poisson distributed demand
Inputs are in red, outputs in black
Mean demand, m : 9

Optimal Order Quantity Performance Measures

Overage penalty, Co : 0.05 Order quantity, Q :
Underage penalty, Cu : 0.35 Expected Lost Sales, L(Q) :
Critical ratio: Cu / (Co + Cu) 0.8750 Expected Sales, S(Q) :
Q 12.00 Expected Left Over Inventory, V(Q) :
Fill rate, f :
Order quantity to achieve a target in-stock probability Stockout probability:
Target in-stock 0.9500
Q 14 Overage penalty, Co :
Underage penalty, Cu :
Order Quantity to achieve a target fill rate Expected profit
Target fill rate 99% Maximum profit
Target lost sales 0.09 Mismatch cost
Q 14
 8
1.73
7.27
0.73
80.78%
45.57%

0.05
0.35
2.51
3.15
0.64
Functions for evaluating the newsvendor and order up-to models

lz(z) Return the standard normal loss function for the z-statistic z. Returns 4 significant dig
Phi(z ) Return Prob(D<=z), where D is a standard normal. Returns 4 significant digits.

loss_normal(q , mu , sigma ) Return expected lost sales with a normal distribution

loss_poisson(s, mu ) Return expected lost sales with a Poisson distribution

find_z(target) Return the z in the Standard Normal Distribution Function Table such that Phi(z) = tar
find_s_poisson(mu, target) Return the S in the Poisson Distribution Function Table such that F(S) = target. Uses

find_lz(target): Return the z in the Standard Normal Loss Function Table such that LZ(z) = target. Us
find_s_loss_poisson(mu , target ) Return the S in the Poisson Loss Function Table such that L(S) = target. Uses the rou

opt_order_normal(mu , sigma, co, cu) Return the quantity, Q, such that F(Q) = critical ratio = cu / (co+cu).

sales(mu, loss) Return expected sales

leftover(q , mu , loss ) Return expected left over inventory
profit(q , mu , loss , co , cu ) Return expected profit
fillrate(mu , loss ) Return expected fill rate
revenue(q , mu , loss , price , v ) Return expected revenue

Notation:
q or s either an order quantity (q) or an order up-to level (s)
mu mean of the distribution
sigma standard deviation of the distribution
z standard normal z-statistic
co overage cost
cu underage cost
v salvage value
atistic z. Returns 4 significant digits.
eturns 4 significant digits.

ction Table such that Phi(z) = target. Uses the round up rule.
ble such that F(S) = target. Uses the round-up rule.

Table such that LZ(z) = target. Uses the round up rule.

h that L(S) = target. Uses the round-up rule.

= cu / (co+cu).