Estimating the lead‐time demand distribution for an autocorrelated demand by the pearson system and a normal approximation

Bong‐Geun An, Stergios Fotopoulos () and Min‐Chiang Wang

Naval Research Logistics (NRL), 1989, vol. 36, issue 4, 463-477

Abstract: The exact first four moments of lead‐time demand L are derived for an AR(1) and a MA(1) demand structures where the arbitrary lead‐time distribution is assumed to be independent of the demand structure. These moments then form a basis for the Pearson curve‐fitting procedure for estimating the distribution of L. A normal approximation to L, a version of the central limit theorem, is obtained under some general conditions. Reorder points (ROPs) of an inventory system are then estimated based on the Pearson system and a normal approximation. Their performances are evaluated. Numerical investigation shows that the Pearson system performs extremely well. The normal approximation, however, is good only for some limited cases, and is sensitive to the choice of the lead‐time distribution. A possible improvement is noted.

Date: 1989
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https://doi.org/10.1002/1520-6750(198908)36:43.0.CO;2-R

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:36:y:1989:i:4:p:463-477

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