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Forecasting the Intermittent Demand for Slow-Moving Items

Author

Listed:
  • Keith Ord
  • Ralph Snyder
  • Adrian Beaumont

Abstract

Organizations with large-scale inventory systems typically have a large proportion of items for which demand is intermittent and low volume. We examine different approaches to forecasting for such products, paying particular attention to the need for inventory planning over a multi-period lead-time when the underlying process may be non-stationary. We develop a forecasting framework based upon the zero-inflated Poisson distribution (ZIP), which enables the explicit evaluation of the multi-period lead-time demand distribution in special cases and an effective simulation scheme more generally. We also develop performance measures related to the entire predictive distribution, rather than focusing exclusively upon point predictions. The ZIP model is compared to a number of existing methods using data on the monthly demand for 1,046 automobile parts, provided by a US automobile manufacturer. We conclude that the ZIP scheme compares favorably to other approaches, including variations of Croston's method as well as providing a straightforward basis for inventory planning.

Suggested Citation

  • Keith Ord & Ralph Snyder & Adrian Beaumont, 2010. "Forecasting the Intermittent Demand for Slow-Moving Items," Monash Econometrics and Business Statistics Working Papers 12/10, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2010-12
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2010/wp12-10.pdf
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    References listed on IDEAS

    as
    1. Muhammad Akram & Rob J Hyndman & J. Keith Ord, 2008. "Exponential smoothing and non-negative data," Working Papers 2008-003, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
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    Cited by:

    1. Snyder, Ralph D. & Ord, J. Keith & Beaumont, Adrian, 2012. "Forecasting the intermittent demand for slow-moving inventories: A modelling approach," International Journal of Forecasting, Elsevier, vol. 28(2), pages 485-496.
    2. Ralph Snyder & Adrian Beaumont & J. Keith Ord, 2012. "Intermittent demand forecasting for inventory control: A multi-series approach," Monash Econometrics and Business Statistics Working Papers 15/12, Monash University, Department of Econometrics and Business Statistics.

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    More about this item

    Keywords

    Croston's method; Exponential smoothing; Intermittent demand; Inventory control; Prediction likelihood; State space models; Zero-inflated Poisson distribution;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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