Construction of the Expected Value Model

Phn t) Variable production cost of unit product h of manufacturer n, which only includes factory overhead and other direct expenses in period f, 

Pmm t)- Production cost of unit raw material in of supplier m in period t. Due to the three-level supply chain, this cost consists of direct material cost, factory overhead and other direct expenses  

Imm t) - Inventory cost of unit raw material in by supplier m in period t  

Iiio i). Inventory cost of unit product h of customer o in period /  

Cnon t) Transportation cost of unit product it from manufacturer n to downstream customers o in period t. The parameter may vary according to the different transportation types. In this hook it is assumed that the parameter is an average transportation cost for the parameter  

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