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Stochastic models underlying Croston's method for intermittent demand forecasting

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Author Info
Lydia Shenstone
Rob J. Hyndman ()

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Abstract

Intermittent demand commonly occurs with inventory data, with many time periods having no demand and small demand in the other periods. Croston's method is a widely used procedure for intermittent demand forecasting. However, it is an ad hoc method with no properly formulated underlying stochastic model. In this paper, we explore possible models underlying Croston's method and three related methods, and we show that any underlying model will be inconsistent with the properties of intermittent demand data. However, we find that the point forecasts and prediction intervals based on such underlying models may still be useful.

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File URL: http://www.buseco.monash.edu.au/depts/ebs/pubs/wpapers/2003/wp1-03.pdf
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Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 1/03.

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Length: 17 pages
Date of creation: Feb 2003
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Handle: RePEc:msh:ebswps:2003-1

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Related research
Keywords: Croston's method exponential smoothing forecasting intermittent demand.

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Find related papers by JEL classification:
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Snyder, Ralph, 2002. "Forecasting sales of slow and fast moving inventories," European Journal of Operational Research, Elsevier, vol. 140(3), pages 684-699, August. [Downloadable!] (restricted)
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  2. Syntetos, A. A. & Boylan, J. E., 2001. "On the bias of intermittent demand estimates," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 457-466, May. [Downloadable!] (restricted)
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