Evaluating the robustness of lead time demand models |
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Authors: | Manuel D Rossetti Yasin Ünlü |
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Institution: | Department of Industrial Engineering, University of Arkansas, 4207 Bell Engineering Center, Fayetteville, AR 72701, USA |
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Abstract: | This paper examines the robustness of lead time demand models for the continuous review (r, Q) inventory policy. A number of classic distributions, (e.g. normal, lognormal, gamma, Poisson and negative binomial) as well as distribution selection rules are examined under a wide variety of demand conditions. First, the models are compared to each other by assuming a known demand process and evaluating the errors associated with using a different model. Then, the models are examined using a large sample of simulated demand conditions. Approximation results of inventory performance measures—ready rate, expected number of backorders and on-hand inventory levels are reported. Results indicate that distribution selection rules have great potential for modeling the lead time demand. |
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Keywords: | Lead time demand distribution Distribution selection rule Highly variable demand Re-order point re-order quantity policies |
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