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ISEN 315 Spring 2011 Dr. Gary Gaukler

ISEN 315 Spring 2011 Dr. Gary Gaukler. Service Level of the Newsvendor. What is service level? A naïve proxy: probability that demand will be less than what we stock = =. Service Level of the Newsvendor. What is wrong with this proxy definition of service level?.

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ISEN 315 Spring 2011 Dr. Gary Gaukler

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  1. ISEN 315Spring 2011Dr. Gary Gaukler

  2. Service Level of the Newsvendor What is service level? A naïve proxy: probability that demand will be less than what we stock = =

  3. Service Level of the Newsvendor What is wrong with this proxy definition of service level?

  4. Service Level of the Newsvendor Instead, use expected fill rate as service level measure:

  5. Demand Uncertainty How do we come up with our random variable of demand? Recall naïve method:

  6. Demand Uncertainty

  7. Demand Uncertainty and Forecasting Using the standard deviation of forecast error:

  8. Example

  9. Example

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