On approximating lead time demand distributions using the generalised lambda-type distribution

In this paper the use of the generalised lambda-type distribution (GLD) is proposed for the analysis of standard inventory problems. Using this distribution to approximate the lead time demand distribution we analyse the generalised newsboy problem and a (Q, r) policy. The standard inventory measures like optimal order size, reorder level, average demand lost, etc. are obtained under the GLD and are compared with those given by Shore's approximation and also under exact distributional assumptions. Through a numerical study the various inventory measures are compared using the GLD and Shore's approximation with the exact distributions. The comparison reveals that the GLD approximation is better suited than Shore's approximation to model the lead time demand.