Stochastic models underlying Croston's method for intermittent demand forecasting

Stochastic models underlying Croston's method for intermittent demand forecasting

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Article ID: iaor20081028
Country: United Kingdom
Volume: 24
Issue: 6
Start Page Number: 389
End Page Number: 402
Publication Date: Sep 2005
Journal: International Journal of Forecasting
Authors: ,
Keywords: inventory
Abstract:

Croston's method is widely used to predict inventory demand when it is intermittent. However, it is an ad hoc method with no properly formulated underlying stochastic model. In this paper, we explore possible models underlying Croston's method and three related methods, and we show that any underlying model will be inconsistent with the properties of intermittent demand data. However, we find that the point forecasts and prediction intervals based on such underlying models may still be useful.

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