• Journal of the Korean Operations Research and Management Science Society
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• v.36 no.3
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• pp.27-43
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• 2011

This paper investigates properties of the newsvendor problem under a schedule involving progressive multiple discounts compared with the standard newsvendor problem under a no-discounts schedule. Unlike most conventional approaches using the criticial fractile to analyze the retailer and/or supplier behavior(s) in the newsvendor problem, our approach uses riskless profit. From the properties revealed through a series of computational experiments, two conjectures regarding the relationship between the expected profits of both newsvendor problems as a generalization over Khouja's argument (1995) are raised. Those conjectures encourage newsvendors who may face budget or warehouse capacity restriction to use the extended model under a multiple-discounts schedule rather than the standard model with no-discounts schedule because they apply for every order quantity as well as the optimal order quantity. In addition to the conjectures, some insightful results are found to justify the implementation of a multiple-discounts schedule from the computational experiments and a new interpretation for implementation of a multiple-discounts schedule that has not been addressed in Khouja is provided.

• Journal of the Korean Operations Research and Management Science Society
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• v.41 no.2
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• pp.101-127
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• 2016

Irrational ordering decisions of supply chain members have been gaining growing importance in the area of supply chain management. Irrational ordering behaviors that deviate from the profit maximizing decisions in the newsvendor settings have observed with human experiments in recent research. These behaviors can be modeled with several typical decision bias elements. This bias in ordering decisions affects the performance of supply chain contracts designed based on the assumption that the supply chain members make optimal decisions, making it necessary to design supply chain contracts by considering the irrationality. The purpose of this research is to derive a method to design the revenue sharing contract that considers human irrationality in ordering decisions. This research considers a simple two-echelon supply chain consisting of one supplier and one retailer, where the supplier is assumed to be perfectly rational while the retailer making newsvendor type ordering decisions displays irrational ordering behaviors. Under this environment, this research analytically models the revenue sharing contract to maximize the total supply chain profit or the supplier's own profits while considering the three decision bias patterns of the retailer, which include the pull-to-center effect, the prospect theory, and the increased subjective sensitivity to the revenue sharing ratio. Irrationality parameters are measured through human experiments based on which and through numerical simulations, we showed that significant improvements in the supply chain performance can be achieved.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.38 no.3
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• pp.39-48
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• 2015

In this study, granting the optimal loan limit on SME (Small and Medium Enterprise) loans of financial institutions was proposed using the traditional newsvendor model. This study was the first domestic case study that applied the newsvendor model that was mainly used to calculate the optimum order quantity under some uncertain demands to the calculation of the loan limit (debt ceiling) of institutions. The method presented in this study made it possible to calculate the loan limit (debt ceiling) to maximize the revenue of a financial institution using probability functions, applied the newsvendor model setting the order volume of merchandise goods as the loan product order volume of the financial institution, and proposed, through the analysis of empirical data, the availability of additional loan to the borrower and the reduction of the debt ceiling and a management method for the recovery of the borrower who could not generate profit. In addition, the profit based loan money management model presented in this study also demonstrated that it also contributed to some extent to the prediction of the bankruptcy of the borrowing SME (Small and Medium Enterprise), as well as the calculation of the loan limit based on profit, by deriving the result values that the borrowing SME (Small and Medium Enterprise) actually went through bankruptcy at later times once the model had generated a signal of loan recovery for them during the validation of empirical data. accordingly, The method presented in this study suggested a methodology to generated a signal of loan recovery to reduce the losses by the bankruptcy.