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On the variance of intermittent demand estimates

Syntetos, A and Boylan, JE 2010, 'On the variance of intermittent demand estimates' , International Journal of Production Economics, 128 (2) , pp. 546-555.

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    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.

    Item Type: Article
    Uncontrolled Keywords: Intermittent demand, forecasting, supply chain management, inventory management
    Themes: Subjects outside of the University Themes
    Schools: Colleges and Schools > College of Business & Law > Salford Business School > Operations and Global Logistics Management
    Journal or Publication Title: International Journal of Production Economics
    Publisher: Elsevier
    Refereed: Yes
    ISSN: 0925-5273
    Funders: Engineering and Physical Sciences Research Council (EPSRC)
    Depositing User: Professor Aris Syntetos
    Date Deposited: 14 Oct 2011 09:28
    Last Modified: 20 Jan 2014 20:53
    URI: http://usir.salford.ac.uk/id/eprint/18310

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