Optimal Order Quantity for Risk-averse Vendors with Perishable Items

PDF

Published: 2023-01-05

Page: 9-13


Fuseini Abdul-Razak Chinto

Department of Mathematics, School of Mathematical Sciences, CK Tedam University of Technology and Applied Sciences, Navrongo UE/R, Ghana.

Nathaniel Kayode Oladejo *

Department of Mathematics, School of Mathematical Sciences, CK Tedam University of Technology and Applied Sciences, Navrongo UE/R, Ghana.

*Author to whom correspondence should be addressed.


Abstract

Risk management plays a great role in the survival of retail business. In view of this, mathematical models that can aid the retailer to avoid unbearable losses are proposed in the paper. We apply the Conditional Value at Risk(CVaR) on retailer’s loss function to develop a model which will produce the order quantity that expose the risk-averse vendor to the least risk of loss. The risk-averse order quantity relates to the probability density function of the retail market.

Keywords: Optimal, risk-averse, perishable, inventory, retail, goodwill


How to Cite

Chinto, F. A.-R., & Oladejo, N. K. (2023). Optimal Order Quantity for Risk-averse Vendors with Perishable Items. Asian Journal of Pure and Applied Mathematics, 5(1), 9–13. Retrieved from https://globalpresshub.com/index.php/AJPAM/article/view/1724

Downloads

Download data is not yet available.

References

Pavlikov K, Uryasev S. Cvar norm and applications in optimization, Op- timization Letters. 2014;8(7):1999–2020.

Xu X, Yan H, Chan CK. Opportunity loss minimization and newsvendor behavior, Discrete Dynamics in Nature and Society. 2017;2017.

Wang D, Dimitrov S, Jian L. Optimal inventory decisions for a risk-averse retailer when offering layaway, European Journal of Operational Research. 2020;284(1):108–120.

Gotoh JY, Takano Y. Newsvendor solutions via conditional value-at-risk minimization, European Journal of Operational Research. 2007;179(1):80–96.

Krokhmal P, Palmquist J, Uryasev S. Portfolio optimization with con-ditional value-at-risk objective and constraints, Journal of Risk. 2002;4:43–68.

Schweitzer ME, Cachon GP. Decision bias in the newsvendor problem with a known demand distribution: Experimental evidence, Management Science. 2000;46 (3):404–420.

Chen J, Huang S, Hassin R, Zhang N. Two backorder compensation mechanisms in inventory systems with impatient customers, Production and Operations Management. 2015;24 (10):1640–1656.

Liu S, Song M, Tan KC, Zhang C. Multi-class dynamic inventory rationing with stochastic demands and backordering. European Journal of Operational Research. 2015 Jul 1;244(1):153-63.

Yu W, Hou G, Xin B. Decision-making optimization of risk-seeking retailer managed inventory model in a water supply chain. Discrete Dynamics in Nature and Society. 2021;2021.

Peng L, Liu Y, Zou Z, Zhang L. Effects of Supply Reliability, Risk Aversion, and Wealth on Retailer’s Optimal Order Strategy. Mathematical Problems in Engineering. 2022;2022.

Rockafellar USO, RT. Optimization of conditional value-at-risk., Journal of Risk; 2000.