Thursday, November 27, 2008
Probablistic Demand
In our studies of Probablistic Demand, I have learned that different probability distributions apply in different situations. In addition, I see the value of these models in their ability to approximate profitability based on different input factors and situations. However, I'm a little unclear as to what makes one probability distribution apply in one situation and another distribution in another situation. Can anyone shed any light on this subject?
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2 comments:
Probabilistic Demand is when demand is uncertain and safety stock is used to achieve a desired level and avoid stockouts. When data on demand is not available there are other models you can use. When demand is variable and lead time is constant, when demand is constand and lead time is variable, and when both demand and lead time are variable. They each require different ROP calculations, but give you a very good figure as to demand.
I believe which distribution to choose depends on the characteristics of the specific demand. A military demand is definitely different from an elementary school demand. The experts in a specific area must have the experience.
-Bing Liu
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