On the variance of intermittent demand estimates

Syntetos, A; Boylan, JE

Abstract

Intermittent demand occurs at random with many time periods showing no demand at all. Forecasting such demand patterns constitutes a challenging exercise because of the associated dual source of variation (demand intervals and demand sizes). Research in this area has developed rapidly in recent years with new results implemented into supply chain software solutions because of its practical
implications. In an inventory context, both the accuracy of the forecasts and their variability (sampling error of the mean) have equal importance in terms of service level achievement and/or inventory cost minimisation. Although the former issue has been studied extensively (mainly building upon Croston’s model, 1972) the latter has been largely ignored. The purpose of this paper is to analyse the most well cited intermittent demand estimation procedures in terms of the variance of their estimates. Detailed derivations are offered along with a discussion of the underlying assumptions. As such, we hope that our contribution may constitute a point of reference for further analytical work in this area as well as
facilitate a better understanding of issues related to modelling intermittent demands.

Citation

Syntetos, A., & Boylan, J. (2010). On the variance of intermittent demand estimates. International Journal of Production Economics, 128(2), 546-555. https://doi.org/10.1016/j.ijpe.2010.07.005

• Journal Article Type: Article
• Publication Date: Jan 1, 2010
• Deposit Date: Oct 14, 2011
• Journal: International Journal of Production Economics
• Print ISSN: 0925-5273
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 128
• Issue: 2
• Pages: 546-555
• DOI: https://doi.org/10.1016/j.ijpe.2010.07.005
• Keywords: Intermittent demand, forecasting, supply chain management, inventory management
• Publisher URL: http://dx.doi.org/ 10.1016/j.ijpe.2010.07.005
• Additional Information: Funders : Engineering and Physical Sciences Research Council (EPSRC); Projects : EPSRC: EP/D062942/1;EPSRC: EP/G006075/1