Fuzzy Multi-Item Newsvendor Problem: An Application to Inventory Management

Abstract

This paper proposes a novel formulation of the fuzzy newsvendor problem for inventory management applications. This new formulation allows the use of any profit function. A new credibility estimation is proposed to explore the neighborhood around the most impactful demand scenarios. Further, a simulation procedure was designed for the different demand scenarios, which allows the comparison of the proposed approach with probabilistic demand curves. The fuzzy newsvendor problem is solved using a modified genetic algorithm (GA), where an initialization mechanism with null values is proposed. The new formulation of the fuzzy newsvendor problem together with the modified GA have shown to improve the average profit up to 55% in problems with low-budget scenarios.