The effect of the covariance factor on the Procurement Problem Variance of net leadtime demand

by: Adams, Keith T.

Publication date: 1988-09-01 00:00:00

Topics: Covariance, Variance, Standard deviation, Leadtime, Demand, Repairables, inventory models, ICP's, Inventory Control Points, Wholesale

Collection: navalpostgraduateschoollibrary; fedlink

Language: English

An analysis is made of the formulae used by the Navy's Inventory
Control Points in calculating the variance of Net Leadtime Demand of repairable
items. A new formula is then derived, which makes use of actual calculations of
covariance between regenerations and demands. The resulting variance values
derived from the new formula are compared with the variance values resident on
the Navy's Ships Parts Control Center data base and are shown to produce lower
variances. The new formula is also compared to the option path formula to
determine which formula produces the smallest variance. The comparison suggests
an under-estimation of variance results when the option path with its estimate of
the covariance is used. The thesis concludes with recommendations for
implementation of the new formula.