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Comparison of Neural Network Methods for Forecasting Lumpy Demand Mohammad R.

Amin-naseri 1*, Bahman Rostami Tabar 2


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Department of Industrial Engineering, Faculty of Engineering, Tarbiat Modares University, Tehran, Iran 2 Laboratoire de l'Intgration du Matriau au Systme Universit Bordeaux1, Bordeaux, France

Abstract Accurate demand forecasting of spare parts is a difficult task particularly for items with lumpy pattern. This study investigates four different types of artificial neural networks (ANNs) namely multilayer perceptron (MLP), generalized regression neural network (GRNN), recurrent neural network (RNN), Time delay neural network (TDNN) and two traditional methods for lumpy demand forecasting. Demand records for 30 types of spare parts from Arak Petrochemical Company in Iran were used to evaluate the accuracy of different methods. It was found that the ANNs provided suitable forecasts, and that estimation using RNN yields better results than other neural networks.

Keyword: Forecasting; Neural network methods; Lumpy demand; Spare parts

Corresponding Author. Tel: +982182880; Fax: +982188006544 Tarbiat Modares University, Ale Ahmad High Way, Tehran, Iran E-mail Address: amin_nas@modares.ac.ir
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1. Introduction Forecasting the future is a critical element of management decision making. The final effectiveness of any decision depends upon the consequence of events following this decision. The ability to forecast the uncontrollable aspects of these events earlier to making the decision should permit an improved choice over that which would otherwise be made[1]. The need for forecasting is increasing as management attempts to decrease its dependence on chance and becomes more scientific in dealing with its environment [2]. Statistical methods, such as exponential smoothing and regression analysis, have been used by analysts in forecasting demand for a number of decades. Many of these methods may perform poorly when demand for an item is lumpy. Lumpy demand patterns are characterized by intervals in which there is no demand and, for periods with actual demand occurrences, by a large variation in demand levels [3]. The problem of modeling the future consumption becomes especially difficult for lumpy patterns which are common for the spare parts inventory systems. Forecasting the lumpy demand requires special techniques in comparison with the smooth and continuous case, since the assumptions for continuity and normal demand distribution do not hold [4]. Lumpy demand patterns are very common, particularly in organizations that hold many spare parts. In the aerospace, and automotive sectors, for example, organizations may have thousands or tens of thousands of stock keeping units (SKUs) classified as intermittent or lumpy [5]. For instance, lumpy demand has been observed in the automotive industry [5,6], in durable goods spare parts [7], in aircraft maintenance service parts [8], in petrochemical industry [9,10] and in telecommunication systems, large compressors, and textile machines [3]. Croston [11] implied that traditional forecasting methods such as single exponential smoothing (SES) may lead to sub-optimal stocking decisions and proposed an alternative
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forecasting method. In proposed procedure, two forecasts for the mean demand-interval and the mean demand-size have been done. The forecast for the demand per period is then calculated as the ratio of the forecasts for demand size and demand interval. Modifications of the original Croston's method were later proposed by several other authors. Willemain et al [12] compared Crostons method with exponential smoothing and concluded that Crostons method is robustly superior to exponential smoothing, although results with real data in some cases show a more modest benefit. Johnston and Boylan [13] obtained similar results, but further showed that Crostons method is always better than exponential smoothing when the average inter-arrival time between demands is greater than 1.25 review intervals. Sani and Kingsman [14] compared various forecasting and inventory control methods on some long series of low demand real data from a typical spare parts depot in the UK. They concluded based on cost and service level, that the best forecasting method is the Crostons method. An important contribution is that by Syntetos and Boylan [15]. They show that Crostons method lead to a biased estimate of demand per unit of time. They also proposed a modified method and demonstrated the improvement in a simulation experiment. Ghobbar and Friend[7] compared various forecasting methods using real data of aircraft maintenance repair parts from an airlines operator. The data is lumpy in nature and they showed that moving average, Holts and Crostons forecasting methods, are superior to other methods such as the exponential smoothing. Willemain et al. [16] compared various forecasting methods using large industrial data sets. They showed that the bootstrapping method produces more accurate forecasts than both exponential smoothing and Crostons method. In an attempt to develop a forecasting procedure that can handle both fast moving and slow moving items, Levn and Segerstedt [17] proposed a modification of Crostons method which was thought to avoid the bias indicated by Syntetos and Boylan[15]. Boylan and syntetos [18] reviewed modified Croston procedure to intermittent demand forecasting proposed by Levn and Segerstedt [17].
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It has been found to be more biased than Croston's method, especially for highly intermittent series. They assessed the accuracy of this method using simulated data and the mean square error measure, and showed that Croston's method is generally more accurate than its modification, particularly for strongly intermittent series. Eaves and Kingsman [19] compared various forecasting methods using real data from the UKs Royal Air Force. They showed that the modified Crostons method [11] by Syntetos and Boylan[15] is the best forecasting method for spare parts inventory control. Syntetos et al. [20] analyzed a wider range of intermittent demand patterns and made a categorization to guide the selection of forecasting methods. They indicated that there are demand categories that are better used with the original Crostons method and there are others that go well with the Syntetos/Boylan modification. In an attempt to further confirm the good performance of their modified Crostons method, Syntetos and Boylan [21] carried out a comparison of forecasting methods including theirs and the original Crostons method. A simulation exercise was carried out on 3,000 products from the automotive industry with fast intermittent demand. It was shown that the modification is the most accurate estimator. Syntetos and Boylan [22] evaluated the empirical stock control performance of the Syntetos-Boylan approximation (SBA). They first discussed the nature of the empirical demand data set and specified the stock control model to be used for experimentation purposes. Performance measures were then selected to report customer service level and stock volume differences. The out-of sample empirical comparison results demonstrate the superior stock control performance of the SBA and enable insights to be gained into the empirical utility of the other estimators. Hua et al. [9, 10] developed a hybrid approach for forecasting the intermittent demand of spare parts. Their approaches provide a mechanism to integrate the demand autocorrelated process and the relationship between explanatory variables and the nonzero demand of spare parts during forecasting occurrences of nonzero demands over lead times. Nezih et al. [23]
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investigated an alternative method developed by Wright (1986) for data sets with missing values and compared it to a Syntetos-Boylan approximation in a simulated environment. A little work has been done in lumpy demand forecasting using neural network. Carmo and Rodrigues [24] applied NN modeling on ten irregularly spaced time-series. They used a Radial Basis Function (RBF) network. Gaussian basis function networks were shown to be adequate models for short-term prediction of irregularly spaced time series, with the ability to generate better predictive performance than alternative models, by taking into account nonlinear correlations in the data. Gutierrez et al. [25] adopted the most widely used method, a multi-layered perceptron (MLP) trained by a back-propagation (BP) algorithm. Their research objective was to assess whether the NN-based approach is a superior alternative to traditional approaches for modeling and forecasting lumpy demand. In this research, generalized regression neural network (GRNN), Elman recurrent neural network (RNN) and Time delay neural network (TDNN) have been applied to 30 types of spare parts in Arak Petrochemical Company in Iran. Statistical accuracy measures showed that our approaches produce more accurate forecasts than two traditional methods (Coston's method and Syntetos-Boylan Approximation) and applied MLP to lumpy patterns by Guttirez et al. This paper is divided into four sections. In the next section, forecasting methods for estimating the lumpy demand problem, accuracy measures and characteristics of data are presented. In the third section, results of our studies are presented. Conclusions and future studies are found in the fourth section. 2. Forecasting Methods

2.1 Croston 's method and Syntetos-Boylan Approximation

Crostons original method estimates the mean demand per period, by applying the exponential smoothing method separately, to the intervals between nonzero demands and their sizes. This method has become an industry standard, and has been adopted by many companies and software vendors [15]. The method works as follows: If a demand occurs, then forecast the mean demand-size using SES and forecast the mean demand-interval using SES, and finally, forecast the mean demand per period as the ratio of Size to Interval; Else, if there is no demand, then do not change any of the forecasts. A disadvantage of the original Croston's method is that it is positively biased. Syntetos and Boylan [15] noted this and proposed a modification. Syntetos and Boylan [21] correct original method by multiplying the forecast for the demand per period with( ), where

is the smoothing constant. Therefore forecast demand per period calculated as follow: ( )

(1)

The selection of the smoothing constants will definitely affect the accuracy of forecasts [23]. The use of low exponential smoothing constant values in the range of 0..0-0.5 has been considered realistic and recommended in the literature on lumpy demand [11, 13]. Syntetos and Boylan [15] suggest that should be no more than 0.15. Eaves [26] choose values in the range of 0.01- 0.1. Syntetos and Boylan [21] used four smoothing constant values of 0.05, 0.10, 0.15, and 0.20 in the single exponential smoothing, Croston's method and SyntetosBoylan approximation. Nezih et al. [23] used smoothing constant ranges from 0.05 to 0.45 for Syntetos and Boylan method, also they used and with

increments of 0.1 for their method. . In this study the smoothing constant value ranges from 0.05 to 0. 5 used in Croston's method and Syntetos-Boylan approximation.

2.2

Artificial neural network models

Hill et al. [27] demonstrated that statistical time-series methods need human interaction and evaluation and can misjudge the functional form relating the independent and dependent variables. These traditional methods can also fail to make necessary data transformations. Traditional time-series methods may not sometimes capture the nonlinear pattern in data [27]. The estimation of artificial neural networks (ANN) or simply Neural network (NN), however, can be automated. These models need to be recalibrated on all previous data. In spite of the great deal of time and effort spent by the researchers in both conventional and soft computing techniques for time series forecasting, the need of producing more and more accurate time series forecasts has forced the researchers to develop innovative methods to model time series. ANNs have been applied in many areas for time series forecasting and widely touted as solving many forecasting and decision modeling problems. NN were introduced as efficient tools of modeling and forecasting about two decades ago. A great deal of research has been devoted to using neural networks techniques especially in business and financial forecasting. One can find numerous ANN applications in a wide range of areas for time series forecasting. Wong et al [28] reviewed bibliography of neural network application research in business during the period of 1994-1998. Their extensive literature searches have identified a total of 302 research articles. Production/operations, finance, marketing/distribution, and information systems were found as the most popular application areas. Regarding the lumpy demand case, most traditional forecasting methods assume a specific distribution of demand time series or the time series of forecast error, while neither assumption is valid for that[8]. Artificial neural network modeling is a logical choice to overcome these limitations [25]. High capabilities of artificial neural networks in capturing non-linearity of lumpy demand patterns can make it a promising choice in lumpy demand forecasting. A little work has been
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done in lumpy demand forecasting using neural network, and we are aware of only two works by Carmo and Rodrigues [24] and Gutierrez et al. [25]. In the subsequent section, the architectural of 4 types of neural network, Multi-layered perceptron(MLP), Generalized Regression Neural Network(GRNN), Recurrent Neural Network(RNN) and Time Delay Neural network(TDNN) have been illustrated. 2.2.1 Multilayer perceptron network(MLP) There are many methods in the NN literature that can be used for flexible nonlinear modeling. The most widely used method is multilayer perceptron (MLP) trained by back-propagation (BP) algorithm. The standard MLP network consists of three components: an input layer, one hidden layer and one output layer. A layer being groups of neurons (or processing units) that share the same input-output connections. In conventional MLP network, the information (or input signal) is passed forward. Thus the MLP network is also referred to as multilayer feedforward network. A major advantage of the MLP is that it is less complex than temporal neural networks such as the time delay networks and the recurrent networks, and has the same nonlinear input output mapping capability. Furthermore, the MLP can be trained even by using the standard Backpropagation algorithm [29]. Gutierrez et al [25] used three layers of MLP for lumpy demand forecasting: one input layer for input variables, one hidden unit layer, and one output layer. The MLP had three nodes in the hidden layer. One output unit was used in the output layer. All the input nodes were fully connected to all the hidden nodes. The hidden nodes were in turn connected to the output node. The input nodes represented two variables: (1) the demand at the end of the immediately preceding period and (2) the number of periods separating the last two nonzero demand transactions as of the end of the immediately preceding period. The output node represented the predicted value of the
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demand transaction for the current period (figure 1). They used a learning rate value of 0.1 and momentum factor value of 0.9. Logistic sigmoid transfer function has been used and all input patterns have been scaled between 0 and 1. <<Insert figure 1 about here>> To exploit the time structure in the data, the neural network must have access to this time dimension. While MLPs are popular in many application areas, they are not well suited for such temporal sequences processing due to the lack of time delay and/or feedback connections necessary to provide a dynamic model.

2.2.2 Proposed models 2.2.2.1 Generalized regression neural network Generalized Regression Neural Network (GRNN) proposed by Spetch [30] does not require an iterative training procedure as in back propagation method. It approximates any arbitrary function between input and output vectors, drawing the function estimate directly from the training data. Furthermore, it is consistent; that is, as the training set size becomes large, the estimation error approaches zero, with only mild restrictions on the function. The GRNN is used for estimation of continuous variables, as in standard regression techniques. It is related to the radial basis function network and is based on a standard statistical technique called kernel regression [30]. The GRNN consists of four layers: input layer, pattern layer, summation layer and output layer. The input units are in the first layer. The second layer has the pattern units and the outputs of this layer are passed on to the summation units in the third layer. The final layer covers the output units. Details of the GRNN are presented by Specht and Schematic diagram
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of GRNN architecture is presented in Figure 2. In GRNN approach, users only choose the value of smoothing parameter and the number of input nodes in the input layer [30]. In this research, wide ranges of the smoothing parameter , i.e. from 0 to 50, have been used and based on extracted input variables from original data series, GRNN model was adapted. In this model defined input variables were extracted from whole observations. <<Insert figure 2 about here>> In the GRNN model the input nodes include following items: 1. The demand at the end of the immediately preceding target period (lag1). 2. The number of consecutive period with no demand transaction immediately preceding target period. 3. The number of periods separating the last two nonzero demand transactions as of the end of the immediately preceding target period. 4. The mean of demand for four period immediately preceding target periods. In order to identify the effective input variables in GRNN architectures, several combinations of different input variables were applied into the network and the performance of networks were evaluated using statistical measures, and then best input sets have been selected based on these measures [31]. 2.2.2.2 Recurrent neural network(RNN) To exploit the time structure in the data, the neural network must have access to this time dimension. One way of introducing memory in the MLP is by considering a feedback connections. The RNN used in this study is the basic Elman-type RNN [32], also referred to as the globally connected RNN. The network consists of four layers (Figure. 3): an input
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layer, a hidden layer, a context layer and an output layer. Each input unit is connected to every hidden unit, as is each context unit. Conversely, there are one-by-one downward connections between the hidden nodes and the context units leading to an equal number of hidden and context units. In fact, the downward connections allow the context units to store the outputs of the hidden nodes (i.e. internal states) at each time step, and then the fully distributed upward links feed them back as additional inputs. Therefore, the recurrent connections allow the hidden units to recycle the information over multiple time steps and thereby to discover temporal information contained in the sequential input and relevant to the target function. Thus the RNN has an inherent dynamic (or adaptive) memory provided by the context units in its recurrent connections [29]. The mathematical model of RNN is as follows: () () ( ( ( ) ( ) ) ( ) )

)2( )3(

In which R: the number of input nodes P: input vector. w1, wc: hidden layer weight's matrix for actual and recursive inputs, recursively. : Output layer weight's matrix. : The number of hidden and output nodes, respectively. b1,b2: the bias vector for hidden and output layers. a1,a2: the output vector for hidden and output layers.

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F and G: transfer function in hidden and output layer, respectively. <<Insert Figure 3 about here>> In this network, following variables have been defined for input nodes in input layer: 1. The demand at the end of the immediately preceding target period (lag1). 2. The number of consecutive periods with demand transaction, immediately preceding target period. 3. The number of consecutive period with no demand transaction, immediately preceding target period. 4. The number of periods separating the last two non-zero demand transactions as of the end of the immediately preceding target period. 5. The number of period between target period and first non-zero demand immediately preceding target period. 6. The number of period between target period and first zero demand immediately preceding target period. 7. The mean of demand for six periods immediately preceding target period. 8. The maximum of demand for six periods immediately preceding target period. The input patterns should be normalized before being presented to the network. When variables are loaded into a neural network, they must be scaled from their numeric range into the numeric range that the neural network deals with efficiently. In this network tan-sigmoid and satlins transfer functions, have been used in hidden and output layers, respectively. Thus, according to following formula, all input patterns were scaled to range of (-1, 1):
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( ) ( ) ( )

(4)

Where S is the time series of variable under consideration, Si is the value of observations and Si)scaled) is equal to normalized values. To find the best number of neurons in the hidden layer, range of 1 to 15 neurons have been examined and neurons with minimum errors were selected. When an input is presented to the network the training algorithm (learning equation) attempts to adjust the weights so that the desired output is produced. In this research back propagation algorithm have been used as training algorithm with learning rate of 0.01. In addition, network's parameter adjusting have been done using adaptive calibration algorithm. Because of the limited historical data, this algorithm preferred to batch mode training for train the network. 2.2.2.3 Time-Delayed Neural Network(TDNN) Another way of introducing memory in the MLP is by replacing the neurons in the input layer with a memory structure called a Tap Delay Line (TDL). Such type of MLP is called TimeDelay feed forward neural network (TDNN) and also referred to as a pseudo-dynamic neural network owing to the static memory structure as opposed to the adaptive memory structure used in recurrent neural networks. To predict temporal patterns, an ANN requires two distinct components: a memory and an associator. The memory holds the relevant past information, and the associator uses the memory to predict future events. In this case the associator is simply a static MLP network and the memory is generated by the tapped delay line by simply holding past samples of the input signal as shown in figure 4 [33]. The mathematical model of TDNN is as follows: () ( () ) )5(

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()

()

)6(

In which D: Time delay memory degree R: the number of input nodes P: input vector. w1,wc: hidden layer weight's matrix for actual and recursive inputs, recursively. : Output layer weight's matrix. : The number of hidden and output nodes, respectively. b1,b2: the bias vector for hidden and output layers. a1,a2: the output vector for hidden and output layers. F and G: transfer function in hidden and output layer, respectively. <<Insert figure 4 about here>> In this research we use a special type of TDNN, in which TDLs have been applied in input layer. This network was named as input delay neural network (IDNN). In this network, the input nodes are the same as elman recurrent neural network architecture. In hidden and output layer tan-sig transfer function was used, therefore, all patterns were scaled to (-1, 1). To find the best results, the range of 1 to 15 neurons in the hidden layer has been used. For training the network, back propagation algorithm with learning rate of 0.01 was used. Same as the RNN architecture we use an adaptive calibration algorithm for adjusting the network parameters. In this study, tap delay line with length 2 to 5 have been used in input layer.
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2.3

Data analysis

In this study real data sets of 30 types of spare parts demand in Arak Petrochemical enterprise in Iran have been used. The data were gathered from Arak Petrochemical enterprise's inventory control package, which include 79 monthly periods from 2001 to 2007. Average inter-demand interval (ADI) and squared coefficient of variation (CV2) measures were used to classify demand patterns into four categories. The demand patterns are classified into lumpy demand category when the average inter-demand interval (ADI) is greater than 1.32 and squared coefficient of variation (CV2) is greater than 0.49. The ADI ranges from 1.7 to 7.4 month and CV2 ranges from 0.52 to 2. Table 1 summarizes the statistical characteristics of the 30 types of spare parts. All 30 items under consideration satisfy criteria specified for demand lumpiness. For Croston's method and Syntetos-Boylan approximation (SBA) data series have been divided into three blocks: (i) initialization, (ii) calibration and (iii) performance measurement. The initialization block is used to initialize values required for methods based on recursive formulae (such as the mean inter-demand interval for Crostons method). In the calibration block, the optimal smoothing constants are identified based on mean square error (MSE). Finally, the optimal smoothing constants are used to update forecasts in the performance block, in which performance statistics are calculated [34]. The lengths of these blocks are 12- 51-16. For neural network methods, data series were divided into two blocks. (i) training set (ii) test set. From 79 monthly observations, 63 observations have been used for train the network, and five Methods tested using last 16 observations. <<Insert Table 1 about here>> 2.4 Statistical Forecast Accuracy Measures
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Forecast-accuracy measures are critical guidelines for proper selection and implementation of forecast models. Standard forecast error measures frequently appearing in the literature do not provide fair evaluations for lumpy demand cases due to the large number of zero demand periods. The conventional measures, such as MAPE and GMAE, have many problems when the actual demand in the dominator of the calculation is zero or the forecast of demand equals to actual one. Hoover [35], Boylan and Syntetos [36], Willemain [37], and Hyndman [38] suggested various metrics and discussed their strengths and weaknesses. Although it seems that no single metric comes out clean, but in this research adjusted mean absolute error(A-MAPE), mean absolute scaled error(MASE) and percentage best(PB) measures have been used. MASE is a scale-free error measure which uses nave forecasts as a benchmark. Let et indicate forecast error, et = dt ft. The scaled error, q at time t is then calculated using (7) and MASE is the average of absolute values of qt :

(7)

Hoover has been suggested three variations on the MAPE: the denominator-adjusted MAPE, the symmetric MAPE, and the ratio of MAD to MEAN. In this study latest measure was used as Adjusted MASE.
| |

Adjusted MAPE

(8)

The third error measure, the percentage best (PB), is the percentage of time periods one method performs better than the other methods under consideration. This approach is robust

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to large forecast errors and the results can be subjected to formal statistical tests .It is a useful measure, although it does not quantify the degree of improvement in forecast error [39]. The mathematical expression for PB for method m is ( ( ) )

(9)

Where, for time period t, methods k under consideration and

if |

| is the minimum of | otherwise .

|for all

To compare the alternative methods under consideration, results were reported on these three error measures, A-MAPE, MASE and PB.

3.

Result and Discussion

In croston's method and the Syntetos-Boylan Approximation, each of 30 time series is divided into three blocks including: initialization, calibration and performance measurement. The value of smoothing constant with minimum error in calibration block was selected for using in performance measurement block according to the Mean Squared Error (MSE) measure. Therefore the results of forecasting using two traditional forecast methods in performance measurement blocks were compared to four neural network approaches. In this paper, three types of neural networks such as generalized regression neural network, elman recurrent neural network and time delay neural network have been used in modeling lumpy demand. In addition, the results of these models were compared to forecasts of multilayered perceptron network applied by Gutierrez et al. [25] in lumpy demand forecasting. Table 2 reports overall A-MAPEs for the methods under consideration. The performance of RNN model is superior among all methods in general (a simple average of 30 A-MAPEs:
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99.68 for RNN vs. 111.44 for IDNN, 126.07 for GRNN, 155.33 for MLP, 163.3 for SBA and 190.87 for Croston method). In calculation of this measure we considered all periods including the periods with no transaction. In 27 and 24 of 30 items, RNN model produce more accurate forecasts than SBA and MLP, respectively. <<Insert Table 2 about here>> Table 3 shows results of MASEs measure for all forecasting methods. In overall RNN approach has a better performance than those other methods (a simple average of 30 MASEs: 0.72 for RNN vs. .83 for IDNN, 0.97 for GRNN, 1.14 for MLP, 1.22 for SBA and 1.39 for CR), Also according to this measure in 29 and 27 of 30 items, RNN model outperforms to SBA and MLP, respectively. <<Insert Table 3 about here>> Table 4 and 5 reports on model performance based on Percentage Best statistics. Because of the superiority of SBA over the Croston's method and recurrent neural network to other proposed neural network in subsequent analysis, the performance of RNN only compared to the SBA and MLP. RNN had the highest PB values for 25 series vs. SBA and 24 series vs. MLP. These PB statistics further establishes the overall superiority of RNN model (averaging 68.71% vs. 31.29% for SBA and 65.67% vs. 34.33% for multi-layered perceptron proposed by Gutierrez et al[25]. <<Insert Table 4 about here>> <<Insert Table 5 about here>> In summary, we found that our proposed neural network models to be superior to Croston's method and Syntetos-Boylan Approximation and recently applied multi-layered perceptron
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by Gutierrez et al(2007) in general, based on all three error measures i.e., Adjusted MAPE, PB, and MASE.

4.

Conclusions and Future Studies

Spare parts inventories frequently display lumpy demand streams, which are difficult to forecast. Croston's method introduced in 1972 is often used as a benchmark when testing new methods [23]. Little work has been done on the application of NN modeling in lumpy demand forecasting. We are aware of only two studies, Carmo and Rodrigues [24] who applied NN modeling on 10 demand "irregularly spaced" time series and recently Gutierrez et al [25] adopted MLP on 24 demand time series. In this study, the generalized regression neural network (GRNN), the elman recurrent neural network (RNN) and the time delay neural network (TDNN) have been used in lumpy demand forecasting. Our study compares the performance of GRNN, RNN and TDNN model to those using two traditional methods like Croston's method and the Syntetos-Boylan approximation and recently suggested MultiLayered Perceptron neural network (MLP) by Gutierrez et al [25]. Using real data sets of 30 types of spare parts from Arak Petrochemical Company in Iran and three performance measures, A-MAPE, PB and MASE, we show that our proposed approaches produce more accurate forecasts. Moreover, this study showed that the elman recurrent neural network is the most effective approach in lumpy demand forecasting. In future studies we shall attempt to use other dynamic neural networks like time delay models with TDL in hidden layer, as well as, hybrid of time delay networks and recurrent neural network. Another interesting research is the use of genetic algorithm to obtain the optimal neural network architecture. The possibility of combining neural network to another

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one for forecasting the occurrence and then the quantity of demand may be useful in lumpy demand forecasting.

Acknowledgements The authors wish to thank Dr. A.A. Syntetos for his encouragement on this research.

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