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Exponential Smoothing for Inventory Control: Means and Variances of Lead-Time Demand

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Author Info

  • Ralph D. Snyder

    ()

  • Anne B. Koehler
  • Rob J. Hyndman

    ()

  • J. Keith Ord

Abstract

Exponential smoothing is often used to forecast lead-time demand for inventory control. In this paper, formulae are provided for calculating means and variances of lead-time demand for a wide variety of exponential smoothing methods. A feature of many of the formulae is that variances, as well as the means, depend on trends and seasonal effects. Thus, these formulae provide the opportunity to implement methods that ensure that safety stocks adjust to changes in trend or changes in season.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2002/wp3-02.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 3/02.

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Length: 14 pages
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:msh:ebswps:2002-3

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Related research

Keywords: Forecasting; inventory control; lead-time demand; exponential smoothing; forecast variance.;

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References

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  1. Hyndman, R.J. & Koehler, A.B. & Snyder, R.D. & Grose, S., 2000. "A State Space Framework for Automatic Forecasting Using Exponential Smoothing Methods," Monash Econometrics and Business Statistics Working Papers 9/00, Monash University, Department of Econometrics and Business Statistics.
  2. Koehler, A.B. & Snyder, R.D. & Ord, J.K., 1999. "Forecasting Models and Prediction Intervals for the Multiplicative Holt-Winters Method," Monash Econometrics and Business Statistics Working Papers 1/99, Monash University, Department of Econometrics and Business Statistics.
  3. Snyder, R.D. & Koehler, A.B. & Ord, J.K., 1998. "Lead Time demand for Simple Exponential Smoothing," Monash Econometrics and Business Statistics Working Papers 13/98, Monash University, Department of Econometrics and Business Statistics.
  4. Peter R. Winters, 1960. "Forecasting Sales by Exponentially Weighted Moving Averages," Management Science, INFORMS, vol. 6(3), pages 324-342, April.
  5. Ord, J.K. & Koehler, A. & Snyder, R.D., 1995. "Estimation and Prediction for a Class of Dynamic Nonlinear Statistical Models," Monash Econometrics and Business Statistics Working Papers 4/95, Monash University, Department of Econometrics and Business Statistics.
  6. Harvey, Andrew & Snyder, Ralph D., 1990. "Structural time series models in inventory control," International Journal of Forecasting, Elsevier, vol. 6(2), pages 187-198, July.
  7. Hyndman, R.J. & Koehler, A.B. & Ord, J.K. & Snyder, R.D., 2001. "Prediction Intervals for Exponential Smoothing State Space Models," Monash Econometrics and Business Statistics Working Papers 11/01, Monash University, Department of Econometrics and Business Statistics.
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