Forecasting sales of slow and fast moving inventories |
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Authors: | Ralph Snyder |
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Institution: | Department of Econometrics and Business Statistics, Monash University, P.O. Box 11E, Clayton, Vic. 3800, Australia |
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Abstract: | Traditional computerised inventory control systems usually rely on exponential smoothing to forecast the demand for fast moving inventories. Practices in relation to slow moving inventories are more varied, but the Croston method is often used. It is an adaptation of exponential smoothing that (1) incorporates a Bernoulli process to capture the sporadic nature of demand and (2) allows the average variability to change over time. The Croston approach is critically appraised in this paper. Corrections are made to underlying theory and modifications are proposed to overcome certain implementation difficulties. A parametric bootstrap approach is outlined that integrates demand forecasting with inventory control. The approach is illustrated on real demand data for car parts. |
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Keywords: | Demand forecasting Inventory control Simulation Parametric bootstrapping Time series analysis |
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