The accuracy of a Modified Croston procedure

A modified Croston procedure to forecast intermittent demand is reviewed. The modified procedure, published in this journal in 2004, consists of a new method for estimating the mean demand and a smoothing method for estimating the variance of the forecasted demand rate. It is found that the smoothed variance estimate is based on an invalid measure of forecast accuracy. Moreover, it is shown that the method of forecasting mean demand produces biased forecasts. The accuracy of this method is assessed, using simulated data and the mean square error measure, and compared with Croston's method and single exponential smoothing. It is found that Croston's method is generally more accurate than its modification, particularly for strongly intermittent series. (C) 2006 Elsevier B.V. All rights reserved.