Newsboy Problem

Newsboy Problem. Understanding optimal inventory levels when you have uncertain demand and a perishable product. This is also a good model for food service to figure out how much to stock, thaw, or prep before an event.

1. Purchase Initial Number of Newspapers. The key input here is the number of "newspapers" you buy to satisfy the demand. Set the Initial On Hand as the number of papers you want for the initial inventory. 

2. Create Customer Demand. This block models the demand for newspapers over one day.

3. Simulate Newspaper Inventory Being Purchased by Customers. The Kit block will consume Newspaper inventory with customers.

4. Separate Sold Newspapers. The top flow only allows Sold Newspapers, allowing you to dive into analytics specifically for the sold ones.

5. Accumulator Blocks Enable Further Analysis. Cost and Revenue blocks add a Cost and Revenue feature to each item that flows through the blocks indicated. You can see these Costs and Revenues in the Item Report and exported to EngineRoom or Excel for further analysis. 

6. Create Items to "Unblock" Newspapers from Kit Block. The Return items are created in the last minute of the simulation, using "Start Demand At Time." When the Return items are created, they immediately join with leftover inventory and move through the "Return" branch of the simulation. This reduces the build-up in the Kit Block and triggers Cost and Revenue to be added to the Returned Papers, which you can analyze in the Item Report. 

This model is an excellent example of building on a simple model to obtain more information. You could leave your initial inventory of papers to build up in the Kit Block or move them out of the Kit Block using the method shown here to add additional features to those items. Adjusting the Initial On Hand of the Newspapers allows you to observe the effects on your downstream processes.