Quantum-enhanced simulation-based optimization for newsvendor problems

• Main Authors: SHARMA, Monit, LAU, Hoong Chuin, RAYMOND, Rudy
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: Simulation-based optimization; Quantum amplitude estimation; Quantum-enhanced algorithm; Newsvendor problem; Artificial Intelligence and Robotics; Computer Sciences
• Online Access: https://ink.library.smu.edu.sg/sis_research/9982; https://ink.library.smu.edu.sg/context/sis_research/article/10982/viewcontent/2403.17389v3.pdf
• Institution: Singapore Management University

Simulation-based optimization is a widely used method to solve stochastic optimization problems. This method aims to identify an optimal solution by maximizing the expected value of the objective function. However, due to its computational complexity, the function cannot be accurately evaluated directly, hence it is estimated through simulation. Exploiting the enhanced efficiency of Quantum Amplitude Estimation (QAE) compared to classical Monte Carlo simulation, it frequently outpaces classical simulation-based optimization, resulting in notable performance enhancements in various scenarios. In this work, we make use of a quantum-enhanced algorithm for simulation-based optimization and apply it to solve a variant of the classical Newsvendor problem which is known to be NP-hard. Such problems provide the building block for supply chain management, particularly in inventory management and procurement optimization under risks and uncertainty.