FORECASTING ERRORS USING MAD

Abstract

The paper is a study of the effects of using mean absolute deviation (MAD) to estimate variability in setting reorder levels for the inventory of a stock item. The method presently employed by NavSup in setting such reorder levels involves exponentially smoothed estimates of the mean and variance of the demand process. Any error involved in setting reorder levels results in a change in the underlying risk which in turn can be translated into costs. Such errors for the method of estimation presently employed are compared with standard maximum likelihood procedures. By simulating several normal systems, the smoothing technique is found to be inferior to classical methods with no reduction in computational difficulties. (Author)

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Document Details

Document Type
Technical Report
Publication Date
Apr 01, 1969
Accession Number
AD0687155

Entities

People

  • Peter W. Zehna

Organizations

  • Naval Postgraduate School

Tags

Communities of Interest

  • Human Systems
  • Materials and Manufacturing Processes

DTIC Thesaurus Topics

  • Binomials
  • Computations
  • Computer Programs
  • Computers
  • Delphi Method
  • Distribution Theory
  • Estimators
  • Inventory
  • Numbers
  • Observation
  • Probability
  • Probability Distributions
  • Random Variables
  • Simulations
  • Standards
  • United States

Fields of Study

  • Mathematics

Readers

  • Logistics and Supply Chain Management.
  • Regression Analysis.