The multi-item newsvendor problem with a budget constraint and fixed ordering costs

This paper deals with a multi-item newsvendor problem subject to a budget c onstraint on the total value of the replenishment quantities. Fixed costs f or non-zero replenishments have been explicitly considered. Dynamic program ming procedures are presented for two situations: (i) where the end item de mand distributions are assumed known (illustrated for the case of normally distributed demand) and (ii) a distribution free approach where only the fi rst two moments of the distributions are assumed known. Ln addition, simple and efficient heuristic algorithms have been developed. Computational expe riments show that the performance of the heuristics are excellent based on a set of test problems.