Establishing inventory measurements using intermittent demand forecasting

Abstract

Demand forecasting is a fundamental element in industrial problems. Forecasts are crucial for accurately estimating intermittent demand to establish inventory measurements. The demand estimation by the Croston method gives less accurate values, which increases the standard deviation value. This increase indicates that the forecasted method is an inappropriate method of intermittent demand data because of the zero values. However, real data were adopted in an industrial sector for three years with constant lead-time. Furthermore, an integration of Bernoulli distribution and geometric distribution has been done to establish the new formulation, then extracting the mean equation and the standard deviation equation of intermittent demand during lead-time. Relying on it, the optimal quantity of safety stock and reorder levels have been obtained. Furthermore, the proposed modified forecasting method was evaluated based on the criteria of CV and the results that obtained gives a less ratio dispersion of data thus accurate results. These procedures are very important to the industrial sectors in drawing future inventory policies.