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A Comparison of Methods for Forecasting Demand for Slow Moving Car Parts

Author

Listed:
  • Ralph D. Snyder

    ()

  • Adrian Beaumont

Abstract

This paper has a focus on non-stationary time series formed from small non-negative integer values which may contain many zeros and may be over-dispersed. It describes a study undertaken to compare various suitable adaptations of the simple exponential smoothing method of forecasting on a database of demand series for slow moving car parts. The methods considered include simple exponential smoothing with Poisson measurements, a finite sample version of simple exponential smoothing with negative binomial measurements, and the Croston method of forecasting. In the case of the Croston method, a maximum likelihood approach to estimating key quantities, such as the smoothing parameter, is proposed for the first time. The results from the study indicate that the Croston method does not forecast, on average, as well as the other two methods. It is also confirmed that a common fixed smoothing constant across all the car parts works better than maximum likelihood approaches.

Suggested Citation

  • Ralph D. Snyder & Adrian Beaumont, 2007. "A Comparison of Methods for Forecasting Demand for Slow Moving Car Parts," Monash Econometrics and Business Statistics Working Papers 15/07, Monash University, Department of Econometrics and Business Statistics.
  • Handle: RePEc:msh:ebswps:2007-15
    as

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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2007/wp15-07.pdf
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    References listed on IDEAS

    as
    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.
    2. Harvey, Andrew C & Fernandes, C, 1989. "Time Series Models for Count or Qualitative Observations," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(4), pages 407-417, October.
    3. Richard A. Davis, 2003. "Observation-driven models for Poisson counts," Biometrika, Biometrika Trust, vol. 90(4), pages 777-790, December.
    4. Hyndman, Rob J. & Koehler, Anne B., 2006. "Another look at measures of forecast accuracy," International Journal of Forecasting, Elsevier, vol. 22(4), pages 679-688.
    5. Heinen, Andreas, 2003. "Modelling Time Series Count Data: An Autoregressive Conditional Poisson Model," MPRA Paper 8113, University Library of Munich, Germany.
    6. 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.
    7. Jung, Robert C. & Kukuk, Martin & Liesenfeld, Roman, 2006. "Time series of count data: modeling, estimation and diagnostics," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2350-2364, December.
    8. Ralph D. Snyder & Gael M. Martin & Phillip Gould & Paul D. Feigin, 2007. "An Assessment of Alternative State Space Models for Count Time Series," Monash Econometrics and Business Statistics Working Papers 4/07, Monash University, Department of Econometrics and Business Statistics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Count time series; forecasting; exponential smoothing; Poisson distribution; negative binomial distribution; Croston method.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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