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doi:10.1093/imaman/dpp016
Advance Access publication on November 12, 2009
J OHN E. B OYLAN
Faculty of Enterprise and Innovation, Buckinghamshire New University, Queen Alexandra
Road, High Wycombe, Bucks HP11 2JZ, UK
A RIS A. S YNTETOS
Centre for Operational Research and Applied Statistics, University of Salford, Manchester
M5 4WT, UK
[Received on 21 December 2008; accepted on 10 August 2009]
Spare parts are very common in many industries and forecasting their requirements is an important op-
erational issue. In recent years, there have been advances in forecasting methods for spare parts, demand
information sharing strategies and the design of forecast support systems. Some work has also been done
on the value of judgemental adjustment of statistical forecasts. In this paper, these developments are
reviewed and avenues for further research are explored.
Keywords: spare parts management; forecasting; stock control; forecast support systems (FSS).
Email: john.boylan@bucks.ac.uk
c The authors 2009. Published by Oxford University Press on behalf of the Institute of Mathematics and its Applications. All rights reserved.
228 J. E. BOYLAN AND A. A. SYNTETOS
with a discussion of the value and importance of judgemental interventions. Subsequently, recent work
is summarized on the value of information sharing in improving forecast accuracy, followed, in Section
5, by a discussion on the importance of an FSS and specific requirements that such systems need to ad-
dress when dealing with intermittent demand items. Finally, the conclusions of this review are presented
in Section 6.
tons methodology. In addition, Crostons method has recently attracted considerable attention from
academic scholars and his article has seen more than 40 citations in the last 4 years.
Croston (1972) proposed a method that captures the compound nature of the underlying demand
structure (i.e. demand arrivals and demand sizes, when demand occurs). In particular, he suggested using
single exponential smoothing for separately forecasting the interval between demand incidences and the
demand sizes. The ratio of the latter to the former may then be used to estimate the mean demand per
time period. The theoretical properties of Crostons method have been investigated by Snyder (2002),
who found his model and method to be inconsistent. Shenstone & Hyndman (2005) cast doubt on the
existence of any stochastic demand model for which Crostons method is optimal.
arrangements and experimental structure. They pointed out that Willemain et al. (2004) did not use
the correct lead time demand distribution for either single exponential smoothing or Crostons method.
This was a twofold criticism consisting of arguments against the use of the classical lead time demand
variance estimation procedure and the use of the normal distribution for representing demand. Also,
Willemain et al. (2004) did not consider published modifications to Crostons method, such as the esti-
mator proposed by Syntetos & Boylan (2005).
Further empirical evidence is required in order to develop our understanding of the benefits offered
by such a non-parametric approach. In particular, a comparison between the recently developed adap-
tations of Crostons method (in conjunction with an appropriate distribution) with the bootstrapping
known when the demand data themselves are unknown. They show that it is not possible to deduce both
the demand process and the demand values at the retailer. This has important consequences for demand
information sharing. If Raghunathan (2001) and Zhang (2004) were correct, and downstream demand
inference were feasible, then there would be no value in information sharing.
Although it has been established that there are savings to be achieved by demand information shar-
ing, much work remains to be done to determine the sensitivity of these savings to the nature of the
ARIMA( p, d, q R ) process, the parameters of the process, the lead timeand the variability of the de-
mand noise. Also, research is required to extend the analysis to more complex supply chains and to
other inventory rules.
50 and 95% percentiles highlighted, in addition to the mean value. Croston (2007) proposed a simpler
alternative, namely the cumulative demand over time; this is intended to help the forecaster to see,
at a glance, if there are any changes to the pattern of demand. Thus, it may facilitate judgemental
adjustment.
With the exception of the results presented by Syntetos et al. (2009b), no other empirical evidence
has been put forward in the literature on the effectiveness of integrating statistical forecasts with man-
agerial judgement. More research is required in this area in order to (i) replicate the findings of Syntetos
et al. and (ii) generate insight as to how and why the relevant judgemental interventions are performed.
Such knowledge would then allow the structured incorporation of rules into FSS, to facilitate decision
making.
Usually, most forecasting software packages incorporate rules (based upon the mean demand and
its standard deviation) to identify extreme demands (outliers). Once the outlier has been detected, it is
then handled separately with appropriate exception reporting. In the case of spare parts, erraticness
(i.e. demand sizes associated with a very high variability) is often an integral part of the underlying
demand structure; thus, the identification of an extreme value and how to deal with that become very
challenging. Research is needed on the identification of outliers in this case and the effect of handling
them differently to other demands.
6. Conclusions
The forecasting of demand for spare parts has attracted a considerable amount of research in recent
years. In this paper, a simple classification scheme has been proposed, namely, (i) pre-processing, (ii)
processing and (iii) post-processing. This classification scheme reminds researchers that the first and
third stages are as worthy of investigation as the second stage (which has received most attention). The
whole process of forecasting can be supported by an FSS.
In the pre-processing stage, advances have been made in classifying spare parts as intermittent or
non-intermittent and as lumpy or non-lumpy. Recent empirical work has shown that forecasting
SPARE PARTS MANAGEMENT 235
accuracy is not sensitive to the exact cut-off values. For faster moving products, the method of seasonal
estimation must be decided. Rules have been proposed to allow a system to classify SKUs according to
whether seasonality should be based on individual series or on grouped data.
In the processing stage, improvements have been suggested to Crostons method, to ensure that it
is (approximately) unbiased. Non-parametric bootstrapping methods have also been proposed, although
their relative performance requires further research. Another line of research is to consider the sharing
of demand information, to reduce the noise in the series being forecasted, and thus improve forecast
accuracy. Recent theoretical papers, that suggest that there is no benefit in information sharing, have
been challenged. More work remains to be done on quantifying the benefit of information sharing,
Funding
Engineering and Physical Sciences Research Council (EP/F012632/1; EP/G006075/1 to A.A.S.).
Acknowledgements
More information on this project may be obtained at http://www.mams.salford.ac.uk/CORAS/Projects/
Bridging the Gap/. The authors would like to thank the participants in the 49th annual conference of the
UK Operational Research Society (Edinburgh, 46 September 2007) for their constructive comments
on an earlier draft of this paper.
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