Candidate Costs

Order Three Cost

Ordering three units removes shortage risk but creates leftover risk.

highlighted = computed this step

Order three

For order quantity 3, every demand outcome is covered.

q=3q=3
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected underage

Expected underage is 0.

E[underage]=0E[\text{underage}]=0
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected overage

Expected overage is 1.

E[overage]=1E[\text{overage}]=1
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie

Expected cost

Expected cost is 2.

E[cost]=2E[\text{cost}]=2
Candidate costsEach row is recomputed from the demand distribution and mismatch costs.candidate expected costschosen q=2 by smaller-order tie ruleqE overE underE costcost bar101621/41/42chosen3102cost tie