Supply Chain of Perishable Products: Inventory Management

We will learn the definition of perishable products and dive into the history of the Newsvendor model.

We will learn four main steps of the Newsvendor model:

1. Find the underage cost

2. Find the overage cost

3. Calculate the critical fractile

4. Derive the optimal order quantity

We will learn how to identify the type of demand probability distribution. Is it uniform, normal, or something else?

If the demand is uniformly distributed, there exists a short and sweet formula to find the optimal order quantity!

If the demand is normally distributed, we don't have a formula, but we don't need to worry — there is another way to find the optimal order quantity.

We will learn how to find the optimal order quantity if we face an irregular demand distribution.

If you manage an airline, hotel, car rental, cruise liner, or event business, you will be able to increase the expected profit of your business by using the optimal level of overbooking.

Learn an alternative way to find the optimal order quantity. No need to calculate the critical fractile anymore, but it takes slightly more time to set up. We will build a simulation and use Solver to find the optimal solution in MS Excel.