Skip to main content
SpringerLink
Log in

A Portfolio Approach to Multi-product Newsvendor Problem with Budget Constraint

  • Chapter
  • First Online:
Handbook of Newsvendor Problems

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 176))

  • 3758 Accesses

Abstract

This chapter investigates a portfolio approach to multi-product newsvendor problem with budget constraint, in which the procurement strategy for each newsvendor product is designed as portfolio contract. A portfolio contract consists of a fixed-price contract and an option contract. We model the problem as an expected profit-maximization model, and propose an efficient solution procedure after investigating the structural properties of the model. We conduct numerical studies to show the efficiency of the proposed solution procedure, and to compare three models with different procurement contracts, i.e., fixed-price contract, option contract, and portfolio contract. Numerical results are shown to demonstrate the advantage of the portfolio model, and sensitivity analysis is provided for obtaining some managerial insights.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The previous version of this work has been published in Computers & Industrial Engineering, 2010, 58: 759-765.

References

  • Abdel-Malek, L., Montanari, R., & Morales, L. C. (2004). Exact, approximate, and generic iterative models for the multi-product newsboy with budget constraint. International Journal of Production Economics, 91, 189–198.

    Article  Google Scholar 

  • Abdel-Malek, L., & Montanari, R. (2005). An analysis of the multi-product newsboy problem with a budget constraint. International Journal of Production Economics, 97, 296–307.

    Article  Google Scholar 

  • Aggarwal, P., & Ganeshan, R. (2007). Using risk-management tools on B2Bs: an exploratory investigation. International Journal of Production Economics, 108, 2–7.

    Article  Google Scholar 

  • Barnes-Schuster, D., Bassok, Y., & Anupindi, R. (2002). Coordination and flexibility in supply contracts with options. Manufacturing and Service Operations Management, 4(3), 171–207.

    Google Scholar 

  • Boeckem, S. & Schiller, U. (2008). Option contracts in supply chains. Journal of Economics and Management Strategy, 17, 219–245.

    Article  Google Scholar 

  • Cachon, G. (2003). Supply chain coordination with contracts. In S. Graves, T. de Kok (Eds.), The handbook of operations research and management science: Supply chain management. Amsterdam: Kluwer.

    Google Scholar 

  • Carbone, J. (2001). HP buyers get hands on design. Purchasing.com, 19 July 2001.

    Google Scholar 

  • Cohen, M., & Agrawal, N. (1999). An analytical comparison of long and short term contracts. IIE Transaction, 31(8), 783–796.

    Google Scholar 

  • Marquez, A. C., & Blanchar, C. (2004). The procurement of strategic parts. Analysis of a portfolio of contracts with suppliers using a system dynamics simulation model. International Journal of Production Economics, 88, 29–49.

    Google Scholar 

  • Erlebacher, S. J. (2000). Optimal and heuristic solutions for the multi-item newsvendor problem with a single capacity constraint. Production and Operations Management, 9(3), 303–318.

    Google Scholar 

  • Fu, Q., Lee, C. Y., & Teo, C. P. (2010). Procurement management using option contracts: random spot price and the portfolio effect. IIE Transactions, 42(11), 793–811.

    Google Scholar 

  • Gomez_Padilla, A., & Mishina, T. (2009). Supply contract with options. International Journal of Production Economics, 122(1), 312–318.

    Google Scholar 

  • Hadley, G. & Whitin, T. (1963). Analysis of inventory systems. Prentice-Hall: Englewood Cliffs.

    Google Scholar 

  • Khouja, M. (1999). The single-period (news-vendor) problem: literature review and suggestions for future research. Omega, 27, 537–553.

    Article  Google Scholar 

  • Kleindorfer, P., & Wu, D. J. (2003). Integrating long-term and short-term contracting via business-to-business exchanges for capital-intensive industries. Management Science, 49(11), 1597–1615.

    Google Scholar 

  • Lau, H. S., & Lau, A. H. L. (1996). The newsstand problem: a capacitated multiple-product single-period inventory problem. European Journal of Operational Research, 94, 29–42.

    Article  Google Scholar 

  • Martínez de Albéniz, V., & Simchi-Levi, D. (2005). A portfolio approach to procurement contracts. Production and Operations Management, 14(1), 90–114.

    Google Scholar 

  • Moon, I., & Silver, E. (2000). The multi-item newsvendor problem with a budget constraint and fixed ordering costs. Journal of the Operational Research Society, 51, 602–608.

    Google Scholar 

  • Vairaktarakis, G.L. (2000). Robust multi-item newsboy models with a budget constraint. International Journal of Production Economics, 66, 213–226.

    Article  Google Scholar 

  • Wang, X., & Liu L. (2007). Coordination in a retailer-led supply chain through option contract. International Journal of Production Economics, 110, 115–127.

    Article  Google Scholar 

  • Wang, Q., & Tsao D. (2006) Supply contract with bidirectional options: the buyer’s perspective. International Journal of Production Economics, 101, 30–52.

    Article  Google Scholar 

  • Wu, D. J., & Kleindorfer, P. R. (2005). Competitive options, supply contracting, and electronic markets. Management Science, 51(3), 452–466.

    Google Scholar 

  • Wu, D. J., Kleindorfer, P., & Zhang, J. E. (2002). Optimal bidding and contracting strategies for capital-intensive goods. European Journal of Operational Research, 137(3), 657–676.

    Google Scholar 

  • Zhang, B., & Du, S.F. (2010). Multi-product newsboy problem with limited capacity and outsourcing. European Journal of Operational Research, 202(1), 107–113.

    Article  Google Scholar 

  • Zhang, B., & Hua, Z. (2008). A unified method for a class of convex separable nonlinear knapsack problem. European Journal of Operational Research, 191(1), 1–6.

    Google Scholar 

  • Zhang, B., Xu, X., & Hua, Z. (2009). A binary solution method for the multi-product newsboy problem with budget constraint. International Journal of Production Economics, 117, 136–141.

    Article  Google Scholar 

  • Zhang, B. (2011). Optimal policy for a mixed production system with multiple OEM and OBM products. International Journal of Production Economics, 130(1), 27–32

    Article  Google Scholar 

  • Zhang, B. (2012). Multi-tier binary solution method for multi-product newsvendor problem with multiple constraints. European Journal of Operational Research, 218(2), 426–434.

    Article  Google Scholar 

  • Zhao, Y., Wang, S., Cheng, T. C. E., Yang, X., & Huang, Z. (2010). Coordination of supply chains by option contracts: a cooperative game theory approach. European Journal of Operational Research, 207(2), 668–675.

    Article  Google Scholar 

Download references

Acknowledgements

The authors would like to thank the reviewers for their comments, which improved the manuscript. This work is supported by National Natural Science Foundation of China (Grants No. 70801065 and 71171206), National Natural Science Foundation of China major program (Grant No. 71090401/71090400), and the Fundamental Research Funds for the Central Universities of China.

Author information

Authors and Affiliations

  1. Lingnan College, Sun Yat-Sen University, Guangzhou, 510275, PR China

    Bin Zhang

  2. School of Management, University of Science and Technology of China, Hefei, Anhui, 230026, PR China

    Zhongsheng Hua

Authors
  1. Bin Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Zhongsheng Hua
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Bin Zhang .

Editor information

Editors and Affiliations

  1. , Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong SAR

    Tsan-Ming Choi

Rights and permissions

Reprints and permissions

Copyright information

© 2012 Springer Science+Business Media New York

About this chapter

Cite this chapter

Zhang, B., Hua, Z. (2012). A Portfolio Approach to Multi-product Newsvendor Problem with Budget Constraint. In: Choi, TM. (eds) Handbook of Newsvendor Problems. International Series in Operations Research & Management Science, vol 176. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-3600-3_16

Download citation

Publish with us

Policies and ethics

Search

Navigation