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Chapter 6 Part 4 - Inventory Decision Making Chapter 6(Part...

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1 1 Inventory Decision Making Chapter 6 (Part 4) 2 Estimation of Discrete Distribution The frequency counts of past demand during lead time can be used to determine a probability distribution as follows: 1. add the frequencies to obtain the number of observations (i.e., sample size) 2. divide each frequency by the sample size frequency 800 = 0.06 800 = 0.01 Demand Number of Cycles Probability 100 8 110 48 120 192 .24 130 304 .38 140 192 .24 150 48 .06 160 8 .01 800 1.00
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