Modified normal demand distributions in ( R, S)-inventory control

Abstract

To model demand, the normal distribution is by far the most popular; the disadvantage that it takes negative values is taken for granted. This paper proposes two modifications of the normal distribution, both taking non-negative values only. Safety factors and order-up-to-levels for the familiar ( R, S)-control system are derived and compared with the standard values corresponding with the original normal distribution. The main conclusion is that generally standard safety factors should be increased—often rather sizably; otherwise the attained service level may fall short considerably.