Laboratory Example Clause Samples

Laboratory Example. The discussion of the laboratory example is based on the analytical model in ▇▇▇▇▇▇ (2005). The standard expected newsvendor costs (per period) are unaffected by the review horizon length, while the expected bonus term does depend on the review horizon. Consider Figure 1 which shows the probability of meeting a 95% fill rate target as a function of S for review hori- zons of T=2 and T=8 where per-period demand follows a discrete uniform distribution from 1 to 100. Note that at lower values of S, the probability of meeting the target with T=2 is substan- tially higher than for T=8, while this is reversed for higher values. For this demand distribution, S=78 would result in a long-run fill rate of 95%, which means that as T becomes very large, the probability of meeting the 95% target goes from close to 0% to close to 100% at S = 78. We see this behavior starting to emerge in the T=8 curve. For long review horizons, the optimal value of S will either be close to the optimal stock level for the traditional newsvendor problem (when B is small), or close to the stock level where the “steep” part of the probability of meeting the tar- get curve starts to flatten out (around 86 for the T=8 curve in Figure 1). When T is small, and the probability of meeting the target curve does not have dramatically “steep” and “flat” sections, the optimal value of S can take on many different values depending on B. We demonstrate this in the next section when we present our benchmark problems for the experiments.
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