Study On Integrated Decision About Demand Information And Inventory

Market demand is always unknown and uncertain. In response to the uncertainty of the market demand, Enterprises need to store a higher safety stock, at the same time, they want more market information to reduce safety stock. But information needs the cost. So, how much enterprises should spend in getting market information and how many safety stocks should they maintain, are important issues they have to face. In this paper, we studied this issue through newsboy model. We taked the demand information as a decision variable, and established an integrated decision model about information and inventory. Then we analyzed the model when demand of the market were uniform distribution and normal distribution, respectively. Further, we also discussed the issue of optimal decision-making when manager was risk averse, and drew some useful implications to managers. From the study, we found that not only the amount of goods enterprises ordered, but also the amount of information they got affect the inventory decision. Safety stock can deal with the uncertainty of demand, spending money to get information can reduce the amount of safety stock. Furthermore, the more risk-averse managers are, the more they hope the demand of information certain and order less products. On the contrary, the less risk-averse people are, the less they order more products, and maintain a certain amount of inventory to meet uncertainty of market demand.