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Article: Nonrobustness of the normal approximation of lead-time demand in a (Q, R) system

TitleNonrobustness of the normal approximation of lead-time demand in a (Q, R) system
Authors
Issue Date2003
PublisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://as.wiley.com/WileyCDA/WileyTitle/productCd-NAV.html
Citation
Naval Research Logistics, 2003, v. 50 n. 2, p. 149-166 How to Cite?
AbstractFor computing an optimal (Q, R) or kindred inventory policy, the current literature provides mixed signals on whether or when it is safe to approximate a nonnormal lead-time-demand ("LTD") distribution by a normal distribution. The first part of this paper examines this literature critically to justify why the issue warrants further investigations, while the second part presents reliable evidence showing that the system-cost penalty for using the normal approximation can be quite serious even when the LTD-distribution's coefficient of variation is quite low-contrary to the prevalent view of the literature. We also identify situations that will most likely lead to large system-cost penalty. Our results indicate that, given today's technology, it is worthwhile to estimate an LTD-distribution's shape more accurately and to compute optimal inventory policies using statistical distributions that more accurately reflect the LTD-distributions' actual shapes. © 2003 Wiley Periodicals, Inc.
Persistent Identifierhttp://hdl.handle.net/10722/177910
ISSN
2015 Impact Factor: 0.787
2015 SCImago Journal Rankings: 1.134
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLau, HSen_US
dc.contributor.authorLau, AHLen_US
dc.date.accessioned2012-12-19T09:40:47Z-
dc.date.available2012-12-19T09:40:47Z-
dc.date.issued2003en_US
dc.identifier.citationNaval Research Logistics, 2003, v. 50 n. 2, p. 149-166en_US
dc.identifier.issn0894-069Xen_US
dc.identifier.urihttp://hdl.handle.net/10722/177910-
dc.description.abstractFor computing an optimal (Q, R) or kindred inventory policy, the current literature provides mixed signals on whether or when it is safe to approximate a nonnormal lead-time-demand ("LTD") distribution by a normal distribution. The first part of this paper examines this literature critically to justify why the issue warrants further investigations, while the second part presents reliable evidence showing that the system-cost penalty for using the normal approximation can be quite serious even when the LTD-distribution's coefficient of variation is quite low-contrary to the prevalent view of the literature. We also identify situations that will most likely lead to large system-cost penalty. Our results indicate that, given today's technology, it is worthwhile to estimate an LTD-distribution's shape more accurately and to compute optimal inventory policies using statistical distributions that more accurately reflect the LTD-distributions' actual shapes. © 2003 Wiley Periodicals, Inc.en_US
dc.languageengen_US
dc.publisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://as.wiley.com/WileyCDA/WileyTitle/productCd-NAV.htmlen_US
dc.relation.ispartofNaval Research Logisticsen_US
dc.titleNonrobustness of the normal approximation of lead-time demand in a (Q, R) systemen_US
dc.typeArticleen_US
dc.identifier.emailLau, AHL: ahlau@business.hku.hken_US
dc.identifier.authorityLau, AHL=rp01072en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1002/nav.10053en_US
dc.identifier.scopuseid_2-s2.0-0037338825en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0037338825&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume50en_US
dc.identifier.issue2en_US
dc.identifier.spage149en_US
dc.identifier.epage166en_US
dc.identifier.isiWOS:000181232700003-
dc.publisher.placeUnited Statesen_US
dc.identifier.scopusauthoridLau, HS=7201497264en_US
dc.identifier.scopusauthoridLau, AHL=7202626080en_US

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