Inventory control problem with freight cost and stochastic demand

This paper generalizes the standard newsboy model to the case including freight cost, in which the capacity of one container is the limit and the freight cost is proportional to the number of the containers used. We show that the optimal ordering quantity is either the newsboy solution or some multiple of the container’s capacity. We also propose an algorithm to compute the optimal policy. Furthermore, we generalize these results to the case in which the inventory and the price are determined jointly with emergency purchase.