Inventory Control Using Statistical Estimates: The Power Approximation and Sporadic Demands (Variance/Mean = 9).
YALE UNIV NEW HAVEN CONN SCHOOL OF ORGANIZATION AND MANAGEMENT
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This study examines the effectiveness of the Power Approximation when there is a considerable probability of zero demand in any period. These sporadic demand sequences are modeled as compound negative binomial distributions, which are specified by a probability q that demand is zero and probability 1-q that demand is negative binomial. In particular, the simulation study that forms the basis of this investigation uses a compound negative binomial distribution with q0.25 and a negative binomial distribution fitted so that the overall variance-to mean ratio is 9.
- Statistics and Probability