Intermittent Demand Forecasting

1Economic and Environmental Context

1.1 Introduction

Demand forecasting is the basis for most planning and control activities in any organisation. Unless a forecast of future demand is available, organisations cannot commit to staffing levels, production schedules, inventory replenishment orders, or transportation arrangements. It is demand forecasting that sets the entire supply chain in motion.

Demand will typically be accumulated in some pre‐defined ‘time buckets’ (periods), such as a day, a week, or a month. The determination of the length of the time period that constitutes a time bucket is a very important decision. It is a choice that should relate to the nature of the industry and the volume of the demand itself but it may also be dictated by the IT infrastructure or software solutions in place. Regardless of the length of the time buckets, demand records eventually form a time series, which is a sequence of successive demand observations over time periods of equal length.

On many occasions, demand may be observed in every time period, resulting in what is sometimes referred to as ‘non‐intermittent demand’. Alternatively, demand may appear sporadically, with no demand at all in some periods, leading to an intermittent appearance of demand occurrences. Should that be the case, contribution to revenues is naturally lower than that of faster‐moving demand items. Intermittent demand items do not attract much marketing attention, as they will rarely be the focus of a promotion, ...