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Intermittent Demand Planning and Service Parts Forecasting

The Problem
Some product items have an irregular demand pattern that makes them all but impossible to forecast with traditional, smoothing-based forecasting methods.  Items with intermittent, or “slow-moving”, demand have many zero values interspersed with random spikes of non-zero demand.  This problem is especially prevalent in companies that manage large inventories of service/spare parts in industries such as aerospace, automotive, high tech, and electronics, as well as in MRO (Maintenance, Repair and Overhaul) organizations and companies manufacturing high-priced capital goods.

In these businesses, as much as 70% of the parts and product items may have intermittent demand.  The intermittent demand pattern makes it difficult to accurately estimate the safety stock and service level inventory requirements needed for successful supply chain planning.  Because forecasts of intermittent demand have been so unreliable, most companies forecast by guessing, or forecast only a fraction of their inventory, or don’t forecast at all.  The result is that billions of dollars are wasted every year because of either excess inventory costs or poor customer service due to stock-outs.

The Smart Solution
SmartForecasts’ patented Intermittent Demand Forecasting technology

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SmartForecasts uses a unique empirical approach that results in highly accurate forecasts where demand is intermittent.  Its patented, APICS award-winning “bootstrapping” technology rapidly generates tens of thousands of possible scenarios of future demand sequences and cumulative demand values over an item’s lead time.  These scenarios are statistically similar to the item’s observed data, and they capture the relevant details of intermittent demand without relying on the naïve assumptions commonly made about the nature of demand distributions by traditional forecasting methods.  The result is a highly accurate forecast of the entire distribution of cumulative demand over an item’s full lead time.  More importantly, with the information these demand distributions provide, you can easily plan your company’s safety stock and service level inventory requirements for thousands of intermittently demanded items with nearly 100% accuracy.

The Benefits
Companies using SmartForecasts’ powerful intermittent demand forecasting and planning solution typically reduce standing inventory by as much as 15-20% in the first year, increase parts availability 10-20% and more, and reduce the need for and associated costs of emergency transshipments to close gaps in their supply chain.  Repair and service parts inventories are truly optimized, leading to more efficient operations, improvements in customer relations, and significantly less cash tied up in inventory.

For an in-depth look at Smart Software’s intermittent demand forecasting and planning technology, please read our white paper on the subject.

To learn how several of our customers are achieving exceptional results with Smart’s unique patented solution, please read the Success Stories on Prevost Car and SKF Vehicle Service Market.


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