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REPLACEMENT PARTS MANAGEMENT: THE VALUE OF INFORMATION
Author(s) -
TibbenLembke Ronald S.,
Amato Henry N.
Publication year - 2001
Publication title -
journal of business logistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.611
H-Index - 79
eISSN - 2158-1592
pISSN - 0735-3766
DOI - 10.1002/j.2158-1592.2001.tb00008.x
Subject(s) - exponential smoothing , operations research , computer science , smoothing , value (mathematics) , demand forecasting , simple (philosophy) , operations management , economics , mathematics , philosophy , epistemology , machine learning , computer vision
Exponential smoothing (ES) and weighted moving average (WMA) are the predominant methods used to predict future demand for replacement parts. They require simple calculations and make use of information readily available. By gathering more information and doing additional calculations, more accurate forecasts can be developed. However, the cost of collecting the additional data could exceed the inventory cost savings from the better demand forecast. This paper presents a straightforward method for determining when the benefits of a more complex forecasting method outweigh the total costs required to use the method.