A new functional approximation to the standard normal loss integral

To determine the reorder point for continuous review inventory policies when demand during the lead time is stochastic, a common approach is to specify that a desired fraction of demand is to be met, on average. When demand during the lead time follows the normal distribution, one must determine the...

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Bibliographic Details
Published in:Production and inventory management journal 1994-06, Vol.35 (2), p.58
Main Author: Keaton, Mark H
Format: Article
Language:English
Subjects:
Approximation
Demand
Inventory
Inventory management
Normal distribution
Order quantity
Standard deviation
Statistical analysis
Online Access:Get full text
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Summary:To determine the reorder point for continuous review inventory policies when demand during the lead time is stochastic, a common approach is to specify that a desired fraction of demand is to be met, on average. When demand during the lead time follows the normal distribution, one must determine the appropriate number of standard deviations, Z*, of safety stock to provide the desired fill rate. A new approximation is presented which not only provides better overall predictions of Z for all values of E(Z), but is also easier to implement.
ISSN:0897-8336