Inventory control with the gamma probability distribution

Application of inventory theory often rely on the normal and negative exponential distributions to represent the lead time demand of fast and slow moving items respectively. Yet it is now accepted that both distributions, when taken together, are incapable of adequately describing the demand characteristics of all items found in the typical inventory. Instead there has been a growing interest in the use of the gamma probability distribution because it not only encompasses both former distributions as special cases but also covers the gaps left by them. In the process a number of methods for calculating control parameters have appeared in the literature for items with gamma distributed lead time demand. As knowledge about the problem has increased there has been a general tendency towards greater simplification. This paper continues the trend by introducing an approach that depends only on concepts from basic statistics. The aim is to eliminate unnecessary complexity and make the associated theory easier to understand.