Forecasting for Spare Parts

Product demand for spare parts in general is characterized by it’s low frequency. Therefore the normal starting point of a demand planning process, which is the generation of statistical forecast, is of limited value. In this project, demand for spare parts resulting from machine failures in the field were considered on machine group level. From these failures on machine group level combined with the configuration of machines (list of spare parts included in a machine type), a failure rate on individual spare parts was determined. This failure rate was input for the calculation of safety stock levels at product level in the local warehouses across the globe, taking into account the desired service level and replenishment lead-times. The safety stock target determination was not part of the demand planning project.