TME351: Spare Parts and Storage

Management
Part II: Spare Parts Demand Forecasting
(Lecture 7 – 20th October, 2018)
Dr. Sameer Al-Dahidi
Assistant Professor, Exchange Coordinator
Mechanical and Maintenance Engineering Department
German Jordanian University

Dr. Sameer Al-Dahidi

 Context of the Course

Maintenance in brief

Part I
Spare Parts

Spare Parts
Maintenance &
Classifications of Spare Parts

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SPs Demand Patterns

Forecasting Key Decisions

Forecasting Techniques
Part II

Forecasting

Forecast Error and TS

Spare Parts Demand

Forecasting as a Process

Inventory and Supply Chains

TME351

Inventory Costs

Exercises Sessions
Economic Order Quantity
Part III

Types of Inventory/Measures
TME351 Course Tree Plan

Inventory Control Systems

Managing Inventories

Special Inventory Models

Part IV
Spare Parts
Management
 Part II: Spare Parts Demand Forecasting

• Spare Parts Demand Patterns

• Forecasting Key Decisions

• Forecasting Techniques

• Forecast Error

• Tracking Signals

• Forecasting as a process

Dr. Sameer Al-Dahidi

 2.2) Time-series Analysis methods
Estimating the Average

• The Simple Average Technique has no adaptive quality if there is a trend, seasonal, or
cyclic pattern. Right?

• The statistical techniques that do have an adaptive quality in estimating the

average in a time-series are:

1. Simple moving averages

2. Weighted moving averages
3. Exponential smoothing.

Dr. Sameer Al-Dahidi

 2.2) Time-series Analysis methods
Simple Moving Averages

• It simply involves calculating the average demand for the n most recent time periods
and using it as the forecast for future time periods.
• For the next period, after the demand is known, the oldest demand from the previous
average is replaced with the most recent demand and the average is recalculated.
• In this way, the n most recent demands are used, and the average “moves” from period
to period.

𝑆𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑙𝑎𝑠𝑡 𝑛 𝑑𝑒𝑚𝑎𝑛𝑑𝑠 𝐷𝑡 + 𝐷𝑡−1 + 𝐷𝑡−2 + ⋯ . +𝐷𝑡−𝑛+1

𝐹𝑡+1 = =
𝑛 𝑛

𝐷𝑡 = Actual demand in period 𝑡

𝑛 = Total number of periods in the average
𝐹𝑡+1 = Forecast for period 𝑡 + 1

Dr. Sameer Al-Dahidi

 2.2) Time-series Analysis methods
Simple Moving Averages

• Forecast error: the difference found by subtracting forecasts from actual demand for a
given period. It measures the accuracy of forecast:

𝐸𝑡 = 𝐷𝑡 − 𝐹𝑡

Dr. Sameer Al-Dahidi

 2.2) Time-series Analysis methods
Simple Moving Averages: remark

• Large values of n should be used when demand series is stable, and small values when
it is more susceptible to change.

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Example

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

Week Spare Parts Demand

1 400
2 380
3 411

b) If the actual number of spare required used in week 4 is 415, what is the forecast error
for week 4?

c) What is the forecast for week 5?

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

a) Compute a three-week moving average forecast for a spare part required in a factory in
week 4. The numbers of spare parts (demand) for the past 3 weeks as follows:

411 + 380 + 400

𝐹4 = = 397.0 𝑠𝑝𝑎𝑟𝑒 𝑝𝑎𝑟𝑡𝑠
3

b) If the actual number of spare parts used in week 4 is 415, what is the forecast error for
week 4?
𝐸4 = 𝐷4 − 𝐹4 = 415 − 397 = 18 𝑠𝑝𝑎𝑟𝑒 𝑝𝑎𝑟𝑡𝑠

c) What is the forecast for week 5?

415 + 411 + 380
𝐹5 = = 402.0 𝑠𝑝𝑎𝑟𝑒 𝑝𝑎𝑟𝑡𝑠
3

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

c) What is the forecast for week 5?

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Solution

c) What is the forecast for week 5?

Demand
Demand

Dr. Sameer Al-Dahidi

 Simple Moving Averages

Demand Discussion

Demand

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 Simple Moving Averages
Discussion

• Thus, the forecast at the end of week 3 would have been 397 patients for week 4, which
fell short of actual demand by 18 patients.
• The forecast for week 5, made at the end of week 4, would be 402 patients.

Dr. Sameer Al-Dahidi

 Simple Moving Averages
Suggested Problem

Demands of a spare part in Company X for the past 12 months are reported below:
Month Demand
January 20
February 24
March 27
April 31
May 37
June 47
July 53
August 62
September 54
October 36
November 32
December 29
Dr. Sameer Al-Dahidi
 Simple Moving Averages
Suggested Problem

1. Use a three-moving average to forecast the demand for the months May through
December.
2. Use a four-moving average to forecast the demand for the months May through
December.
3. Which method do you recommend?

Dr. Sameer Al-Dahidi

 References

[1] www.youtube.come, NPTEL, Operations and Supply Chain Management by Prof. G.

Srinivasan , Department of Management Studies, IIT Madras.

[2] Spare Parts and Storage Management, Winter 2017/2018, Eng. Dina, German
Jordanian University.

[3] Search in www.google.com

[4] Text Book – Part 3 (Designing and Managing Supply Chains), Chapter 14
(Forecasting Demand).

Dr. Sameer Al-Dahidi

 Thank You
Dr. Sameer Al-Dahidi
Assistant Professor, Exchange Coordinator
Mechanical and Maintenance Engineering Department
GJU
sameer.aldahidi@gju.edu.jo

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Dr. Sameer Al-Dahidi