Introduced on day 26
Newsvendor critical ratio
The planning quantile c_under / (c_under + c_over) that minimizes expected cost when planning too low and too high cost different amounts per unit.
In detail
The newsvendor result: choose the quantity at which the probability of demand exceeding it equals the ratio of the over-planning cost to the sum of both costs. In forecasting it turns a forecast distribution and two unit costs into a single planning number. It assumes known unit costs, linear costs and a forecast distribution that is calibrated at the planning horizon.