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Calculating order-up-to levels for products with intermittent demand

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  • Teunter, Ruud
  • Sani, Babangida

Abstract

The Croston (1972. Forecasting and stock control for intermittent demands. Operational Research Quarterly 23, 289-303) method is the standard method for forecasting intermittent demand. It has been shown to perform well in various studies and is available in most commercial forecasting packages. However, little attention has been paid to linking the method with inventory control, i.e., using the generated forecasts to calculate the inventory control parameters. In this study we consider the most commonly applied order-up-to policy, and show how the forecasts can be used to calculate order-up-to levels. In a numerical study, we show that the calculated order-up-to levels lead to service levels that are close to their targets.

Suggested Citation

  • Teunter, Ruud & Sani, Babangida, 2009. "Calculating order-up-to levels for products with intermittent demand," International Journal of Production Economics, Elsevier, vol. 118(1), pages 82-86, March.
    • Handle: RePEc:eee:proeco:v:118:y:2009:i:1:p:82-86
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    References listed on IDEAS

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    1. L W G Strijbosch & R M J Heuts & E H M van der Schoot, 2000. "A combined forecast—inventory control procedure for spare parts," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(10), pages 1184-1192, October.
    2. Willemain, Thomas R. & Smart, Charles N. & Shockor, Joseph H. & DeSautels, Philip A., 1994. "Forecasting intermittent demand in manufacturing: a comparative evaluation of Croston's method," International Journal of Forecasting, Elsevier, vol. 10(4), pages 529-538, December.
    3. 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.
    4. Leven, Erik & Segerstedt, Anders, 2004. "Inventory control with a modified Croston procedure and Erlang distribution," International Journal of Production Economics, Elsevier, vol. 90(3), pages 361-367, August.
    5. Syntetos, Aris A. & Boylan, John E., 2006. "On the stock control performance of intermittent demand estimators," International Journal of Production Economics, Elsevier, vol. 103(1), pages 36-47, September.
    6. A H C Eaves & B G Kingsman, 2004. "Forecasting for the ordering and stock-holding of spare parts," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(4), pages 431-437, April.
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    Cited by:

    1. Kourentzes, Nikolaos, 2013. "Intermittent demand forecasts with neural networks," International Journal of Production Economics, Elsevier, vol. 143(1), pages 198-206.
    2. Prak, Derk & Teunter, Rudolf & Babai, M. Z. & Syntetos, A. A. & Boylan, D, 2018. "Forecasting and Inventory Control with Compound Poisson Demand Using Periodic Demand Data," Research Report 2018010, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. Altay, Nezih & Litteral, Lewis A. & Rudisill, Frank, 2012. "Effects of correlation on intermittent demand forecasting and stock control," International Journal of Production Economics, Elsevier, vol. 135(1), pages 275-283.
    4. Chia-Nan Wang & Thanh-Tuan Dang & Ngoc-Ai-Thy Nguyen, 2020. "A Computational Model for Determining Levels of Factors in Inventory Management Using Response Surface Methodology," Mathematics, MDPI, vol. 8(8), pages 1-23, July.
    5. Kourentzes, Nikolaos, 2014. "On intermittent demand model optimisation and selection," International Journal of Production Economics, Elsevier, vol. 156(C), pages 180-190.

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