Demand categorization, forecasting, and inventory control for intermittent demand items

[EN] It is commonly assumed that intermittent demand appears randomly, with many periods without demand; but that when it does appear, it tends to be higher than unit size. Basic and well-known forecasting techniques and stock policies perform very poorly with intermittent demand, making new approaches necessary. To select the appropriate inventory management policy, it is important to understand the demand pattern for the items, especially when demand is intermittent. The use of a forecasting method designed for an intermittent demand pattern, such as Crostons method, is required instead of a simpler and more common approach such as exponential smoothing. The starting point is to establish taxonomic rules to select efficiently the most appropriate forecasting and stock control policy to cope with thousands of items found in real environments. This paper contributes to the state of the art in: (i) categorisation of the demand pattern; (ii) methods to forecast intermittent demand; and (iii) stock control methods for items with intermittent demand patterns. The paper first presents a structured literature review to introduce managers to the theoretical research about how to deal with intermittent demand items in both forecasting and stock control methods, and then it points out some research gaps for future development for the three topics.This research was part of the project GEMA, supported by the Ministerio de Educación y Ciencia (Ref. DPI 2007-65441).Babiloni Griñón, ME.; Cardós, M.; Albarracín Guillem, JM.; Palmer Gato, ME. (2010). Demand categorization, forecasting, and inventory control for intermittent demand items. South African Journal of Industrial Engineering. 21(2):115-130. https://doi.org/10.7166/21-2-54S11513021

The Effects of the Correlation of Electric Materials on Forecasting and Stock Control

Forecasting and stock control play an important role in the electric companies because outstanding forecasting and stock control increase service level obviously and decrease stock cost effectively. However, the majority of the electric materials are intermittent demand, resulting in poor forecasting and stock control performance. Therefore, exploring the reasons that affect forecasting performance and stock control is necessary. This paper explores the effects of the correlation of intermittent electric materials on forecasting and stock control. First, we divide the correlation into three categories: autocorrelation in demand sizes, autocorrelation in intervals and cross-correlation between demand size and interval. Forecasting by SBA approach and using periodic dynamic inventory strategy (T, S) to control stock, exploring the effects of these three correlations on forecast accuracy, stock cost and service level. The data shows that correlations of electric materials affect their forecasting and stock control, which will help company find more accurate forecast approach and lower the cost of stock in the future

Previsão de demanda em séries temporais intermitentes mediante a utilização do Método de Croston

Dissertação (mestrado) - Universidade Federal de Santa Catarina, Centro Tecnológico, Programa de Pós-Graduação em Engenharia de Produção, Florianópolis, 2014A suavização exponencial tem sido um método clássico empregado na previsão de demanda e fornece bons resultados quando a série temporal é cheia, isto é, há ocorrência de demanda em todos os períodos. Mas quando a série apresenta comportamento intermitente, as demandas nulas (zeros) afetam o desempenho do método da suavização exponencial. Neste cenário, o método de Croston, desenvolvido em 1972, responde de forma mais assertiva. Vários estudos sucederam o trabalho pioneiro apresentado por Croston, focando na busca das menores discrepâncias entre o previsto e o observado. O objetivo central deste trabalho é aplicar o Método de Croston em séries temporais intermitentes e observar os possíveis ganhos, frente a outros métodos, oriundos da previsão de demanda. Nos objetivos específicos busca-se: a) investigar a formulação do Método de Croston; b) investigar métodos alternativos que surgiram a partir do método original proposto por Croston; c) confrontar estes métodos, próprios para demanda intermitente, com métodos tradicionais de previsão de demanda; d) utilizar ferramentas acessíveis de previsão, com vistas à aplicação em pequenas empresas. São apresentadas e utilizadas medidas de discrepância próprias para séries intermitentes e que balizam a escolha de um método de previsão sobre outro. Potenciais ganhos na previsão da demanda foram avaliados A partir destes ganhos, um melhor nível de serviço e consequente nivelamento do estoque mereceram análise. Os resultados obtidos mostram que nem sempre o método de Croston ou suas variantes tem desempenho superior aos demais métodos de previsão consagrados na literatura, principalmente quando comparados com a suavização exponencial. Isto denota a importância de se testar diversos métodos até se encontrar aquele que melhor responda ao comportamento da série temporal, seja ela intermitente em baixa, média ou alta intensidade.Abstract: The exponential smoothing has been a classic method used to forecast demand and provides good results when the time series is full, that is, there is demand to occur in all periods. But when the series presents intermittent behavior, null demands (zeros) affect the performance of the exponential smoothing method. In this scenario, the Croston method, developed in 1972, responds more assertively. Several studies followed the pioneering work presented by Croston, focusing on the search of the smallest discrepancies between predicted and observed. The central objective of this work is to apply the Croston's method on intermittent time series and watch the possible gains, compared to other methods, arising from the demand forecast. In the specific goals we seek to: a) investigate the formulation of Croston's method; b) investigate alternative methods that have emerged from the original method proposed by Croston; c) To compare these methods, suitable for intermittent demand, with traditional demand forecasting methods; d) use available tools for forecasting, in order to apply them in small businesses. Forecasting error measures are presented and are used to select whether one method has more potential over another. Potential gains in forecasting demand were evaluated. From those gains, a better level of service and consequent stock leveling deserved analysis. The results show that not always the Croston's method or its variants have superior performance to other forecasting methods established in the literature, especially when compared with the exponential smoothing. This shows the importance of testing different methods until you find the one that best responds to the behavior of the time series, whether intermittent in low, medium or high intensity

Una metodología para la estimación eficiente del stock de referencia en políticas de revisión periódica con demanda discreta

El objetivo de la presente tesis es proponer una metodología para la estimación eficiente del stock de referencia en el diseño de políticas (R, S) cuando se utiliza en nivel de servicio de ciclo como restricción de diseño, asumiéndose que el proceso de demanda es estacionario con una función de probabilidad discreta, independiente, e idénticamente distribuida. Para ello se analiza el comportamiento de cuatro métodos de cálculo, tres aproximados y uno exacto. La aplicación del método exacto supone un elevado esfuerzo computacional cuyo coste no se justifica para cualquier ítem y cualquier circunstancia. Por ello es importante conocer el comportamiento de los métodos aproximados y los riesgos asociados a su utilización. En la práctica, el método más extendido para calcular el nivel de servicio de ciclo, denominado clásico, es una aproximación al cálculo exacto. Sin embargo, en la presente tesis se demuestra que su utilización para la determinación del stock de referencia no siempre asegura cumplir con el criterio de diseño de la política establecido como objetivo. Los métodos analizados son: (1) el método exacto propuesto por Cardós et al. (2006); (2) La aproximación PI derivada por Cardos y Babiloni (2008) a partir de hipótesis para simplificar el método exacto; (3) La aproximación PII derivada por Cardos y Babiloni (2008) a partir de hipótesis para simplificar el método exacto y la aproximación PI; y (4) el método clásico para el cálculo del stock de referencia [ver p. ej. Silver et al. (1998)], denominado aproximación clásica en la presente tesis, que resulta además al asumir hipótesis para simplificar el método exacto, la aproximación PI y la aproximación PII [Cardos y Babiloni (2008)]. La metodología propuesta se fundamenta en un experimento lo suficientemente amplio (115.941 casos) que justifica su validez.Babiloni Griñón, ME. (2009). Una metodología para la estimación eficiente del stock de referencia en políticas de revisión periódica con demanda discreta [Tesis doctoral no publicada]. Universitat Politècnica de València. https://doi.org/10.4995/Thesis/10251/8322Palanci

Propuesta de metodología para planificación de abastecimiento y establecimiento de políticas de inventarios para el área de respuestos de la concesionaria "Automotriz Car’s"

In the automotive industry, the post-sales service is critical since this will result in competitive advantage or in the contrary in a disadvantage against the competence. This sector is determined by the customer satisfaction. The present project discusses a methodology for the supply and also recommends techniques for the tactical and strategic decision making in the post sales area that will allow to maximize the customer satisfaction measured by the service level. In order to develop the proposed methodology the project is hence divided in three parts; in the first part the company’s information regarding supply and inventory processes and policies are obtained. Afterwards, a categorization is done in order to choose the field of action and the demand analysis is performed on this group in order to select and determine the best forecasting technique for the vehicle replacement parts. Finally, a comparison between the actual and recommended inventory techniques is done. As a result a proposed methodology for inventory management is determined. In the project’s last part a roadmap to implementation is suggested following a scientifically based method for organizational change.En el sector automotriz el área de post-venta es crítica debido a que ésta resultará en una ventaja competitiva o al contrario en una desventaja frente a la competencia. El resultado en este sector se determina por la satisfacción del cliente. El presente proyecto consiste en la propuesta de una metodología para el abastecimiento y la recomendación de técnicas para la toma de decisiones tácticas y estratégicas del sector post-venta para la compra o aprovisionamiento que permitirán maximizar el índice de satisfacción del cliente medido a través del nivel de servicio al cliente. Para desarrollar la metodología propuesta de abastecimiento el proyecto se divide en tres partes de análisis y comparación de técnicas de abastecimiento más una comparación del modelo propuesto contra el modelo que se aplica actualmente; y por último una propuesta de un mapa de implementación. En la primera parte se levantó toda la información correspondiente al abastecimiento y al manejo de inventarios, se caracterizan sus políticas y procesos. En segundo lugar se realizó una categorización para seleccionar el campo de acción, sobre éste se ejecutó el análisis de demanda, comparando las técnicas propuestas con las técnicas aplicadas actualmente, y una investigación de la literatura para encontrar el mejor método de pronóstico para el área de repuestos vehiculares. En tercer lugar se investigó y aplicó un método para gestión de inventarios de aplicación y desarrollo para el área de repuestos. En el último paso, se llevó a cabo una comparación de la eficiencia y eficacia de los modelos comparando datos reales con los datos obtenidos de la metodología propuesta. Una vez que se desarrolló la metodología propuesta, se planteó una propuesta para implementación de la metodología mediante una ruta de implementación siguiendo un método técnico para un cambio organizacional

On the bias of Croston's forecasting method

Croston's forecasting method (CR) has been shown to be appropriate in dealing with intermittent demand items. The method, however, suffers from a positive bias as discussed by Syntetos and Boylan [Syntetos, A.A., Boylan, J.E., 2005a. The accuracy of intermittent demand estimates. International Journal of Forecasting 21, 303-314] who proposed a modification (SB). Unfortunately, the modification ignores the damping effect on the bias of the probability that a demand occurs. This leads to overcompensation and a negative bias, which can in fact be larger than the positive bias of the original method. Syntetos [Syntetos, A.A., 2001. Forecasting for Intermittent Demand, Unpublished Ph.D thesis, Buckinghamshire Chilterns University College, Brunel University] proposed another modification (SY) that takes the damping effect into account, thereby reducing the bias. However, he eventually disregarded it from the empirical analysis, because of the analytical results that SY never dominates SB as well as CR when both bias and variance are considered. Levén and Segerstedt [Levén, E., Segerstedt, A., 2004. Inventory control with a modified Croston procedure and Erlang distribution. International Journal of Production Economics 90, 361-367] also proposed a modified Croston method (LS) and claimed it to be unbiased. We compare all four methods in a numerical study. Our results strengthen the finding from Boylan and Syntetos [Boylan, J.E., Syntetos A.A., 2007. The accuracy of a modified Croston procedure. International Journal of Production Economics 107, 511-517] that LS suffers from a much more severe bias that the other methods. They also confirm SB as the best method when the Mean Square Error is considered. However, SY has a much smaller average absolute bias of 1% compared to 5% for the SB method. From an inventory control point of view, this is an important advantage of the SY method, since biases distort calculations of the expected lead time demand as well as safety stock calculations. An additional advantage of the SY method is its robust performance over the range of parameter values that we considered. Based on these results, we suggest that the SY method should receive more consideration as an alternative to CR and SB.Forecasting Intermittent demand Croston's method

On the bias of Croston's forecasting method

Croston’s forecasting method (CR) has been shown to be appropriate in dealing with intermittent demand items. The method, however, suffers from a positive bias as discussed by Syntetos and Boylan [Syntetos, A.A., Boylan, J.E., 2005a. The accuracy of intermittent demand estimates. International Journal of Forecasting 21, 303–314] who proposed a modification (SB). Unfortunately, the modification ignores the damping effect on the bias of the probability that a demand occurs. This leads to overcompensation and a negative bias, which can in fact be larger than the positive bias of the original method. Syntetos [Syntetos, A.A., 2001. Forecasting for Intermittent Demand, Unpublished Ph.D thesis, Buckinghamshire Chilterns University College, Brunel University] proposed another modification (SY) that takes the damping effect into account, thereby reducing the bias. However, he eventually disregarded it from the empirical analysis, because of the analytical results that SY never dominates SB as well as CR when both bias and variance are considered. Levén and Segerstedt [Levén, E., Segerstedt, A., 2004. Inventory control with a modified Croston procedure and Erlang distribution. International Journal of Production Economics 90, 361–367] also proposed a modified Croston method (LS) and claimed it to be unbiased. We compare all four methods in a numerical study. Our results strengthen the finding from Boylan and Syntetos [Boylan, J.E., Syntetos A.A., 2007. The accuracy of a modified Croston procedure. International Journal of Production Economics 107, 511–517] that LS suffers from a much more severe bias that the other methods. They also confirm SB as the best method when the Mean Square Error is considered. However, SY has a much smaller average absolute bias of 1% compared to 5% for the SB method. From an inventory control point of view, this is an important advantage of the SY method, since biases distort calculations of the expected lead time demand as well as safety stock calculations. An additional advantage of the SY method is its robust performance over the range of parameter values that we considered. Based on these results, we suggest that the SY method should receive more consideration as an alternative to CR and SB