The inverse Gaussian approximation to the lead time demand

Abstract

This paper is intended to show that the inverse Gaussian distribution can lie effectively used to approximate the lead time demand in inventory control problems. The computations involved with this approximation are shown to be simple. Some pertinent properties of the inverse Gaussian distribution are summarized. Numerical examples are given for a few cases of distributed demands coupled with distributed lead times and in each case the inverse Gaussian approximation results are compared with the exact and/or other approximations.