Estimating the demand distributions of single-period items having frequent stockouts.

*(English)*Zbl 0912.90108Summary: Very often, the service level of a single-period newsboy-type product is set at such a low level that: (i) stockouts occur in the majority of the periods, and (ii) a large right-hand side of the empirical demand distribution is never observable. This paper reports a practical approach for estimating the periodic-demand distribution of such a product. The approach has three components: (i) using the non-parametric ‘product limit’ method to estimate the fractiles of the observable left-hand side of the empirical distribution; (ii) using a subjective approach and an ‘extrapolation of hourly sales’ approach to ‘fill in’ the missing right-hand side of the empirical distribution; (iii) fitting the estimates obtained in the preceding two components to a Tocher curve – which can handle the diversity of shapes of a realistic demand distribution and is also computationally very convenient for subsequent calculations for production/inventory decisions. The entire approach is shown to be simpler but more powerful than existing alternatives for the problem.

##### MSC:

90B05 | Inventory, storage, reservoirs |

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\textit{H.-S. Lau} and \textit{A. H. L. Lau}, Eur. J. Oper. Res. 92, No. 2, 254--265 (1996; Zbl 0912.90108)

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