International Journal of Advanced Culture Technology

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Sustainable Considerations for Newsvendor Decisions

  • Kwak, Jin Kyung (Ewha School of Business, Dept. of Business Administration, Ewha Womans Univ.)
  • Received : 2020.11.03
  • Accepted : 2020.12.02
  • Published : 2020.12.31
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Abstract

It is important to have an appropriate amount of inventory for effective operations. This study seeks to develop a sustainable newsvendor model by incorporating environment-related costs into the existing well-known (single-period) newsvendor model. Since leftovers do more harm to environments than stockouts, the optimal order amount tends to be lower than the traditional quantity. However, this is not the case when a second buy is allowed. A second order opportunity is prevalent in industries where it improves demand forecast despite incurring extra costs. In this study, we conduct an extensive numerical analysis for a newsvendor situation with a permitted second buy. The results show that we can reduce inventory costs by considering sustainability concerns. The research idea of including sustainability considerations into existing inventory models can be extended to a more general case and provides managerial insights for better inventory decisions.

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