Modeling and long-term forecasting demand in spare parts logistics businesses

Abstract

In order to provide high service levels, companies competing in the electronics manufacturing sector need to ensure the availability of spare parts for repair and maintenance operations. This paper examines the purchase life-cycles of electronic spare parts and presents a new way of modeling and forecasting spare part demand for electronic commodities in the spare parts logistics services. The presented modeling methodology is founded on the assumption that the purchase life-cycles of spare parts can be described by a curve with short term fluctuations around it. For this purpose, a flexible Demand Model Function is introduced. The proposed forecasting method uses a knowledge discovery-based approach that is built upon the combined application of analytic and soft computational techniques and is able to indicate the turning points of the purchase life-cycle curve. The novelty lies in the fact that the model function has certain characteristics which support describing and interpreting the demand trend as a function of time. The application of our methodology is mainly advantageous in long-term forecasting, it can be especially useful in supporting purchase planning decisions in the ramp-up and declining phases of purchase life-cycles of product specific spare parts. A demonstrative example is used to illustrate the applicability of the proposed methodology. Its forecasting capability is compared to those of some widely applied methods in business practice. From the results, the new method may be viewed as a viable alternative spare part demand forecasting technique in spare part logistics sector.