African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4198

Full Length Research Paper

Optimal two ordering policy with censored demand information in a quick response (QR) system

Hua-ming Song1*, Hui Yang1, Lei Ma2, Qian Xu1 and Jun Fang3
  1School of Economics and Management, Nanjing University of Science and Technology, Nanjing 210094, China. 2School of Humanities and Social Sciences, Nanjing University of Science and Technology, Nanjing 210094, China. 3School of Mechanics, Nanjing University of Science and Technology, Nanjing 210094, China.
Email: [email protected]

  •  Accepted: 15 September 2011
  •  Published: 28 December 2011

Abstract

 

This paper investigates the optimal two ordering policy regarding censored demand information in a quick response (QR) system, which generalizes the conventional information updates issues in a real-life setting. Firstly, the optimal two ordering issue is modeled and formulated, and an explicit expected profit objective is presented; secondly, the existence of the optimal solution is analyzed. Thirdly, a straightforward sample-based algorithm is developed to solve the optimal solution, and a numerical example is provided to illustrate practical usage of our research. Further, the comparison between the model in which censored demand information is considered and that in which the censored demand information is neglected; and some managerial insights are proposed to help practitioners to treat censored information setting correctly. The results show that the model with censored demand information can reveal the “real” optimal ordering decisions and increase the expected profit.

 

Key words: Censored demand information, seasonal product, quick response (QR), demand forecast, two-stage ordering.