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On Replenishing Items with Seasonal Intermittent Demand

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Author(s): Gary Mitchell | Meike Niederhausen

Journal: American Journal of Economics and Business Administration
ISSN 1945-5488

Volume: 2;
Issue: 1;
Start page: 90;
Date: 2010;
Original page

Keywords: Forecasting | inventory | intermittent demand

ABSTRACT
Problem statement: There are numerous difficulties associated with replenishing intermittent demand items and these are compounded when the demand distribution(s) vary seasonally. Excess inventories during an “off” season are typical, while shortages frequently occur during the “in” season, especially at the transition points between “seasons”. Approach: Evaluate the extent to which items characterized by non-stationary (seasonal) intermittent demand can be managed with commonly used forecasting and replenishment methods, including existing “intermittent demand” methods. Extensive simulation studies were conducted using combinations of two commonly used forecasting methods and two replenishment policies to evaluate the impact of non-stationary intermittent demand on key inventory performance measures, including average inventory and net profits, including the extent to which combinations of forecasting and replenishment models is adversely impacted by the non-stationary demand distributions. Results: No combination of forecasting and replenishment methods tested consistently outperformed the others and all methods demonstrated a propensity to replace demanded units an average of 10 weeks before the inventory was required to avert a shortage. Conclusion: The inventory performance of the policies tested was consistent with our expectations and offered evidence of the need for further development of forecasting and replenishment models addressing the special characteristics of items with non-stationary intermittent demand.
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