Exponential smoothing is often used to forecast demand in stock control systems. However, this method almost always produces inappropriate stock levels if demand is intermittent. The Croston method is suitable if intermittent demand appears at random, with many - or even most - time periods having no demand; where demand does occur, the historical data is randomly distributed, independently or almost independently of the demand interval. Such demand patterns are known as "lumpy demand" or irregular, random or sporadic demand. One example might be demand for spare parts or equipment that is usually ordered in batches to replenish downstream inventories.
The Croston method models the data as a two-step process: one step for the intervals between demands, and the other for the sizes of the demands. This method makes separate exponential smoothing estimates of the average size of a demand and the average interval between demands.
More terms such as Croston method in Dictionary C.
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