Inventory Simulation (newsvendor)

In this modeling exercise, you are asked to determine an inventory level that would minimize the grand total cost for a two-hundred-month planning period.

  • For each month, the demand follows the same pattern described below.
    • Demand: normally distributed with a mean of 100, sd of 30
    • Overage cost: 10 unit/USD
    • Shortage cost: 5 unit/USD
  • Once determined, you will not change the inventory level during the two-hundred-month period.

This problem exists a clear analytical solution using a newsvendor model. Students will have to do a brute-force approach to determine the cost minimizing inventory level.

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