Lumpy demand

Inert stock A term used by CGR Management Consultants to define slow moving categories of inventory. Components can include defective items, obsolete items, stranded odd quantity components with no demand, and lumpy demand items. The inert category can be a large portion of total inventory. Reducing it may require a concerted effort on several fronts. 

Lumpy demand An infrecjuently occurring demand that cannot be forecast. The usual result is a need to carry an insurance level of stock. Also called discontinuous demand. 

Sarker, B.R. and G.R. Parija, Optimal Batch Size and Raw Material Ordering Policy for a Production System with a Fixed-Interval, Lumpy Demand Delivery System , European Journal of Operational Research, 89 (1996), 593-608. 

Applies to certain patterns of demand that contain enough history to provide a forecast of future demand. The opposite is "lumpy" demand, for which no forecast is possible. 

The implications of dependent demand are illustrated in the example given in Figure 5.8, which shows how a regular off-take at the retail level can be converted into a much more lumpy demand situation at the plant by the use of reorder points. 

That said, there are others factors apart from product maturity that determine whether capacity increments are large compared with demand growth. In most chemical product sectors, minimum economic plant size increases quite rapidly over time as a result of technological innovation, and can lead to very lumpy supply-side additions. On the other hand, when industries become extremely... 

Several alternatives are available when production is not repetitive and/or high volume in nature. For example, when demand is lumpy and cannot be smoothed into a level production schedule, a... 

Note, however, that the orders received by the central warehouse follow a lumpy pattern with demands bunched up with erratic intervals in between. This lumpiness reflects the batch sizes of orders placed by parts stations. But orders received by the central warehouse display a negative serial correlation across time, i.e., if we receive an order from a parts station at time t, there is a much smaller probability of receiving another order from that same station in period t +. ... 

Thus the echelon faces a demand with a mean of 100 units and a standard deviation of 141.42 units. Notice that the increased standard deviation of demand at the echelon reflects both order uncertainty as well as the lumpiness caused by the batched ordering from locations. 

Ward, J.B. (1978). Determining reorder points when demand is lumpy. Management Science, 24 6), 623-632. 

---