The development of a hierarchical forecasting method for predicting spare parts demand in the South Korean Navy–A case study

The development of a hierarchical forecasting method for predicting spare parts demand in the South Korean Navy–A case study

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Article ID: iaor20126216
Volume: 140
Issue: 2
Start Page Number: 794
End Page Number: 802
Publication Date: Dec 2012
Journal: International Journal of Production Economics
Authors: , ,
Keywords: supply & supply chains, demand, combinatorial optimization
Abstract:

In the South Korean Navy the demand for many spare parts is infrequent and the volume of items required is irregular. This pattern, known as non‐normal demand, makes forecasting difficult. This paper presents a case study using data obtained from the South Korean Navy to compare the performance of various forecasting methods that use hierarchical and direct forecasting strategies for predicting the demand for spare parts. A simple combination of exponential smoothing models was found to minimise forecasting errors. A simulation experiment verified that this approach also minimised inventory costs.

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