Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/16154
Title: Optimal two-stage ordering policy with Bayesian information updating
Authors: Choi, TM 
Li, D
Yan, H
Issue Date: 2003
Publisher: Palgrave Macmillan Ltd
Source: Journal of the Operational Research Society, 2003, v. 54, no. 8, p. 846-859 How to cite?
Journal: Journal of the Operational Research Society 
Abstract: We investigate in this paper an optimal two-stage ordering policy for seasonal products. Before the selling season, a retailer can place orders for a seasonal product from her supplier at two distinct stages satisfying the lead-time requirement. Market information is collected at the first stage and is used to update the demand forecast at the second stage by using Bayesian approach. The ordering cost at the first stage is known but the ordering cost at the second stage is uncertain. A two-stage dynamic optimization problem is formulated and an optimal policy is derived using dynamic programming. The optimal ordering policy exhibits nice structural properties and can easily be implemented by a computer program. The detailed implementation scheme is proposed. The service level and profit uncertainty level under the optimal policy are discussed. Extensive numerical analyses are carried out to study the performance of the optimal policy.
URI: http://hdl.handle.net/10397/16154
ISSN: 0160-5682
DOI: 10.1057/palgrave.jors.2601584
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