Prediction intervals for future demand of existing products with an observed demand of zero

Abstract

A proposed technique for forming reliable prediction intervals for the future demand rate of existing products with observed demand of zero is illustrated using methodology adapted from software reliability. By using the demand information from a group of products which includes slow-moving products, prediction intervals for the future demand rate of the products with an observed demand of zero are constructed. A simulation study examined the reliability of these prediction intervals across experimental conditions that included product group size, mean time between demand, and Type I error levels. The proposed prediction intervals had empirical Type I errors closer to their nominal values when there were a sufficient number of products with no sales and also with some sales.Intermittent demand Prediction intervals Simulation Poisson process