John E. Boylan - Intermittent Demand Forecasting: Context, Methods and Applications

1. Chapter 3
2. Chapter 4
3. Chapter 5
4. Chapter 6
5. Chapter 7
6. Chapter 8
7. Chapter 9
8. Chapter 10
9. Chapter 13
10. Chapter 14
11. Chapter 15

1. Chapter 1
2. Chapter 2
3. Chapter 3
4. Chapter 4
5. Chapter 5
6. Chapter 6
7. Chapter 8
8. Chapter 9
9. Chapter 10
10. Chapter 11
11. Chapter 12
12. Chapter 13
13. Chapter 14

John E. Boylan

Lancaster University

Lancaster, UK

Aris A. Syntetos

Cardiff University

Cardiff, UK

This edition first published 2021

2021 John Wiley & Sons Ltd

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions.

The right of John E. Boyan and Aris A. Syntetos to be identified as the authors of this work has been asserted in accordance with law.

Registered Offices

John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA

John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, UK

Editorial Office

9600 Garsington Road, Oxford, OX4 2DQ, UK

For details of our global editorial offices, customer services, and more information about Wiley products visit us at www.wiley.com.

Wiley also publishes its books in a variety of electronic formats and by printondemand. Some content that appears in standard print versions of this book may not be available in other formats.

Limit of Liability/Disclaimer of Warranty

The contents of this work are intended to further general scientific research, understanding, and discussion only and are not intended and should not be relied upon as recommending or promoting scientific method, diagnosis, or treatment by physicians for any particular patient. In view of ongoing research, equipment modifications, changes in governmental regulations, and the constant flow of information relating to the use of medicines, equipment, and devices, the reader is urged to review and evaluate the information provided in the package insert or instructions for each medicine, equipment, or device for, among other things, any changes in the instructions or indication of usage and for added warnings and precautions. While the publisher and authors have used their best efforts in preparing this work, they make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives, written sales materials or promotional statements for this work. The fact that an organization, website, or product is referred to in this work as a citation and/or potential source of further information does not mean that the publisher and authors endorse the information or services the organization, website, or product may provide or recommendations it may make. This work is sold with the understanding that the publisher is not engaged in rendering professional services. The advice and strategies contained herein may not be suitable for your situation. You should consult with a specialist where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Library of Congress CataloginginPublication Data applied for

ISBN 978-1-119-97608-0 (hardback); LCCN - 2021011006

Cover Design: Wiley

Cover Image: Mata Atlantica - Atlantic Forest in Brazil FG Trade/Getty Images, Turbine Brasil2/Getty Images

For Jan and Rachel

The images on the front of this book highlight a crucial tension for all advanced economies. There is a desire to travel more and consume more, but also a growing awareness of the detrimental effects that this is having on the environment. There is a belated realisation that those of us living in countries with developed economies need to consume less and waste less.

Waste can occur at all stages of the supply chain. Consumers may buy food they never eat or clothes they never wear. Retailers and wholesalers may order goods from manufacturers that never sell. These wastages can be significantly reduced by better demand forecasting and inventory management. Some items conform to regular demand patterns and are relatively easy to forecast. Other items, with irregular and intermittent demand patterns, are much harder.

Wastage can be addressed by changes in production, moving away from builtin obsolescence and towards products that can be maintained and repaired economically. For this to be an attractive proposition, spare parts need to be readily available. Unfortunately, these items are often the most difficult to forecast because many of them are subject to the sporadic nature of intermittent demand. Although there have been significant advances in intermittent demand forecasting over recent decades, these are not all available in commercial software. In the final chapter of this book, we highlight the progress that has been made, including methods that are freely available in open source software.

The reasons for the slow adoption of new forecasting methods and approaches in commercial software are varied. We believe that one of the reasons is a lack of appreciation of the benefits that may accrue. Because intermittent demand items are so difficult to forecast, it may be thought that highly accurate forecasting methods can never be found. This may be true. However, it is possible to find more accurate methods, which can contribute towards significant improvements in inventory management.

There is also a need for greater awareness of the methods that have been developed in recent years. Information on them is scattered amongst a variety of academic journals, and some of the articles are highly technical. Therefore, we have set ourselves the challenge of synthesizing this body of knowledge. We have endeavoured to bring together the main strands of research into a coherent whole, and assuming no prior knowledge of the subject.

There are various perspectives from which demand forecasting can be addressed. One option would be to take an operations management view, with a focus on forecasting and planning processes. Another would be to take a more statistical perspective, starting with mathematical models and working through their properties. While some of our material has been influenced by these orientations, the dominant perspective of this book is that of operational research ( OR ). The start point of OR should always be the reallife situation that is encountered. This means that it is essential to gain an indepth understanding of inventory systems and how forecasts inform these decisions. Such an appreciation enables a sharper focus on forecasting requirements and the appropriate criteria for a good forecast.