In the single-period model,with discrete stocking levels,the service level must equal or exceed,the ratio C_s/(C_s + C_e).

Question

Quizplus · Accepted Answer

This is true because the service level represents the probability of meeting demand during the stocking period, and the formula provided calculates this probability by dividing the expected profit under stocking level S1U1B1 by the total expected profit (which includes both stocking levels S1U1B1 and S1U1B0). Therefore, if the service level is higher than this ratio, it means that the expected profit under S1U1B1 is higher than the expected profit under S1U1B0, and it is optimal to stock at level S1U1B1.

In the Single-Period Model,with Discrete Stocking Levels,the Service Level Must