ORIGINAL ARTICLE A single-period inventory model with inventory update decision: the newsboy problem extension Maryam Haji & Houshang Darabi Received: 23 June 2008 / Accepted: 14 July 2009 / Published online: 6 August 2009 # Springer-Verlag London Limited 2009 Abstract Inventory models use a set of parameters to establish their respected optimal policy. Such parameters are information items that have to be generated (obtained) and, therefore, there is a cost for obtaining them. Tradi- tional inventory models simply ignore the existence of this cost and, therefore, the established optimal policies by these models may not be necessarily optimal in practice. In this paper, based on the requirements dictated by a real-world project, we analyze the impact of information update decisions for a specific class of inventory model (a single- period inventory model). The main difference between the presented model in this paper and newsboy problem is the presence of an inventory update decision and its effect on other inventory decisions. That is to decide when inventory-related information should be updated, how much should be ordered, and what is the maximum level of demand that can be promised to the customers. We formulate these decisions and develop mathematical meth- ods to find the corresponding optimal policies. Keywords Inventory control . Single-period problem . Information update . Stochastic batch arrival time 1 Introduction Traditional inventory/production model techniques use different information items as their inputs and consider the cost of information as an indirect or overhead cost item. Therefore, it is hard to measure the information system cost and the value of information for specific decision-making policies. Since the information available at each stage of the inventory system has a direct impact on production scheduling, inventory control, and delivery plans, in recent years, several companies have significantly tried to improve their performance by better coordinating the activities of the individual components of their inventory systems. Among the various potential improvement in these areas, informa- tion sharing has received a lot of attention and became a main driver of operational performance. Fisher and Raman [1] describe a problem where most production has to be committed before demand occurs. They propose a quick-response system analytically and show that retailers can achieve cost savings by committing production quantities based on initial demand information. Lee et al. [2] analyze the benefits of sharing real-time information on demands and/or inventory levels between suppliers and customers. Schwarz et al. [3] show that the optimal cost of the information sharing scenario with cancelation option is between the optimal cost of the information sharing scenario without cancelation option and the cost of a scenario where no information is shared. DeCroix and Mookerjee [4] analyze a single-product periodic-review inventory model where a retailer decides whether to buy information on future demands before placing an order. They derive an optimal inventory policy for the perfect information case and present numerical M. Haji : H. Darabi (*) Department of Mechanical and Industrial Engineering, University of Illinois at Chicago, Chicago, IL, USA e-mail: hdarabi@uic.edu M. Haji e-mail: mhaji2@uic.edu Int J Adv Manuf Technol (2010) 47:755–771 DOI 10.1007/s00170-009-2216-3