Journal of the Operational Research Society

, Volume 56, Issue 5, pp 495–503

On the categorization of demand patterns

Case-Oriented Paper

DOI: 10.1057/palgrave.jors.2601841

Cite this article as:
Syntetos, A., Boylan, J. & Croston, J. J Oper Res Soc (2005) 56: 495. doi:10.1057/palgrave.jors.2601841

Abstract

The categorization of alternative demand patterns facilitates the selection of a forecasting method and it is an essential element of many inventory control software packages. The common practice in the inventory control software industry is to arbitrarily categorize those demand patterns and then proceed to select an estimation procedure and optimize the forecast parameters. Alternatively, forecasting methods can be directly compared, based on some theoretically quantified error measure, for the purpose of establishing regions of superior performance and then define the demand patterns based on the results. It is this approach that is discussed in this paper and its application is demonstrated by considering EWMA, Croston's method and an alternative to Croston's estimator developed by the first two authors of this paper. Comparison results are based on a theoretical analysis of the mean square error due to its mathematically tractable nature. The categorization rules proposed are expressed in terms of the average inter-demand interval and the squared coefficient of variation of demand sizes. The validity of the results is tested on 3000 real-intermittent demand data series coming from the automotive industry.

Keywords

categorizationforecastinginventory controlintermittent demand

Copyright information

© Palgrave Macmillan Ltd 2004

Authors and Affiliations

  1. 1.University of SalfordGreater ManchesterUK
  2. 2.Buckinghamshire Chilterns University CollegeBucksUK
  3. 3.Independent Systems and Statistical ConsultantHertsUK