Operations Management: Processes and Supply Chains, 12th Edition

One-Period Decisions

One of the dilemmas facing many retailers is how to handle seasonal goods, such as winter coats. Often, they cannot be sold at full markup the next year because of changes in styles. Furthermore, the lead time can be longer than the selling season, allowing no second chance to rush through another order to cover unexpectedly high demand. A similar problem exists for manufacturers of other fashion goods.

This type of situation is often called the newsboy problem. If the newspaper seller does not buy enough newspapers to resell on the street corner, sales opportunities are lost. If the seller buys too many newspapers, the overage cannot be sold because nobody wants yesterday’s newspaper.

The following process is a straightforward ...