Measuring the impact of asymmetric demand distributions on inventories

Most studies on inventory management under demand uncertainty analyse the detrimental impacts of demand variability (i.e., its coefficient of variation). Consequences of the shape of demand distribution (i.e., its multi-modality and asymmetry) have instead received only minor attention. This paper focuses on the study of the effects of the shape of demand distribution on inventories. Results from a simulation show that demand shape plays a key role in the determination of the stock investments. In particular, this paper measures asymmetry of demand distributions and shows its significant impact on inventories. Moreover, it is demonstrated how multi-modality and asymmetry can both have a negative or a positive impact, depending on the type of asymmetry and the target service level the firm is facing.