Stochastic Lead Time
Overview
Lead time
is a common variable that is assumed to be stochastic.
Stochastic Lead Time
Generally, it is assumed that lead times are distributed
normally.
If the period over which demand is measured (for instance, demand per day) is small relative to the lead time, then
the total demand over the lead time is
{% Total \, Demand = \sum_1^n Demand_i %}
If the demand is assumed to be normal, then the
sum is normal.
In this case,
the mean and variance is given by
{% mean = mean_{lead \: time} \times mean_{demand}%}
{% variance = mean_{lead \: time} \times variance_{demand} + variance_{lead\:time}\times mean_{demand}^2%}
