A Column Generation Scheme for Distributionally Robust Multi-Item Newsvendor Problems

This paper studies a distributionally robust multi-item newsvendor problem, where the demand distribution is unknown but specified with a general event-wise ambiguity set. Using the event-wise affine decision rules, we can obtain a conservative approximation formulation of the problem, which can typically be further reformulated as a linear program. In order to efficiently solve the resulting large-scale linear program, we develop a column generation-based decomposition scheme and speed up the computational efficiency by exploiting a special column selection strategy and stopping early based on a Karush-Kuhn-Tucker condition test. Focusing on the Wasserstein ambiguity set and the event-wise mean absolute deviation set, a computational study demonstrates both the computational efficiency of the proposed algorithm, which significantly outperforms a commercial solver and a Benders decomposition method, and the out-of-sample superiority of distributionally robust solutions relative to their sample average approximation counterparts. History: Accepted by Nicola Secomandi, Area Editor for Stochastic Models & Reinforcement Learning. Funding: This work was supported by the Natural Sciences and Engineering Research Council of Canada [492997-2016, RGPIN-2016-05208], the National Natural Science Foundation of China [71972012], Alliance de recherche numérique du Canada, and Canada Research Chairs [CRC-2018-00105]. It was also supported by Groupe d’études et de recherche en analyse des décisions (GERAD). Finally, this research was enabled in part by support provided by Digital Research Alliance of Canada ( https://alliancecan.ca/en ). Supplemental Material: The software that supports the findings of this study is available within the paper and its supplemental information ( https://pubsonline.informs.org/doi/suppl/10.1287/ijoc.2022.0010 ) as well as from the IJOC GitHub software repository ( https://github.com/INFORMSJoC/2022.0010 ). The complete IJOC Software and Data Repository is available at https://informsjoc.github.io/ .