Research on Distribution Network Spare Parts Demand

Forecasting and Inventory Quota

Zengyu Wang1

Jiyin Wen2

School of Electric Power, South China University of

Technology
Guangzhou, China, 510640

Guangzhou Power Supply Co. Ltd.

Guangzhou, China, 510000

Dong Hua3
School of Electric Power, South China University of
Technology
Guangzhou, China, 510640
E-mail: dhua@scut.edu.cn

AbstractDue to the professionalism and particularity of the

power equipment, a reasonable inventory equipment quota
forecasting and purchasing plan can guarantee the electrical
power construction and maintenance work smoothly.
Furthermore, an accurate quota forecasting can also save a
large volume of liquid funds for the power companies. This
paper establishes a reasonable spare parts demand forecasting
and inventory quota model based on SVM algorithm which
takes material historical demand, repair schedule, the failure
rate of the equipment and operating environment into full
consideration. Moreover, the spare parts of electrical equipment
in distribution network are divided into Class A, Class B1 and
Class B2 through the activity based classification, through which
the inventory quota method based on the different types of
inventory management model is established. Finally, the
calculation results of actual distribution power network show
that the proposed SVM model is of high prediction accuracy,
providing a simple and effective solution for inventory
equipment management of electricity equipment.
Index TermsDistribution network; Spare parts; Activity based
classification; Demand forecasting; Inventory quota

I.

INTRODUCTION

Spare parts inventory is playing a very important role in

the distribution network equipment management, concerning
how to improve the operational reliability of power supply by
arranging a reasonable maintenance for spare parts. As a
technology and capital intensive enterprise, the power
company spends lots of funds on electric equipment every
year. Therefore, how to establish reasonable spare parts
demand forecasting model and inventory quota model are the
issues about which the operation and equipment department in
power industry really concern.

Corresponding author: Dong Hua, Email: dhua@scut.edu.cn

This work was supported by the Fundamental Research Funds for the
Central Universities
978-1-4799-7537-2/14/$31.00 2014 IEEE

Researches on spare parts inventory of enterprises began

from 1950s, and then inventory management became a branch
of enterprise logistics, being an important part of the normal
operation of enterprises management. Equipment spare parts
are the support materials for equipment maintenance, which is
the important factor to guarantee the equipment in good
condition. With the development of science and technology,
inventory costs are gradually increased for the equipment is
more and more complex and expensive, which would cost
much more liquidity and affect the enterprise economic
benefit. There are some research achievements on the spare
parts inventory from Telecom, nuclear and military, but the
inventory research related to power system is still less.
Currently, the research of spare part inventory management is
divided into three parts, including spare parts inventory
classification, demand forecasting and inventory management
strategy.
Spare parts inventory are sorted by analytic hierarchy
process (AHP) based on a variety of factors in reference paper
[1]. In reference paper [2], fuzzy evaluation theory is applied
to sort the spare parts inventory by quantizing the fuzzy vector
and getting the comprehensive evaluation to divide the
material importance. Reference [3] adopted the Bayesian
algorithm as demand forecasting algorithm for which the
demand was not obeying any distribution. In reference paper
[4], a new intermittent demand forecasting method called the
Bootstrap algorithm sampled virtual data from historical data
to forecast the possibility of lead time demand, and then
obtained the forecast demand of per unit time. Paper [5]
applied the data mining technology to building a flexible and
accurate forecasting database and used the inventory demand
forecasting model based on exponential smoothing model to
forecast the inventory demand. A synthesized forecasting
model which involves both the time series and the multi-

regression methods is established by analyzing the factors

influencing the demand in paper [6]Paper [7] proposes the
BP neural network model for the forecast of the inventory by
simulating the expert in forecasting the enterprise inventory.
But the distribution network spare parts demand is discrete
and intermittent, and the relevant historical data is usually not
enough, so the methods of the previous references is not
suitable for distribution network spare parts demand
forecasting. Support Vector Machine (SVM) algorithm, as a
kind of novel machine learning method, is implemented with a
great deal of experience especially in small sample
forecasting problem.
In this paper, the regression forecasting algorithm based on
SVM is used to predict the distribution network spare part
demand through the study of inventory demand forecasting
theory and the feature of distribution network spare parts. The
SVM forecasting model takes material historical demand,
repair schedule, the failure rate of the equipment and operating
environment into full consideration, and then the feasibility of
the demand forecast algorithm is verified by the data of
column circuit breaker from a power supply enterprise in
Guangdong. The spare part inventory quota management
algorithm adopted in distribution network is also presented in
this paper. The distribution network spare parts of the power
supply enterprise are divided into A, B (including B1 and B2)
two classes, through which the inventory quota models are
established respectively for the two classes. Finally, the
corresponding examples show the practical application of
stock quota management algorithm.
II.

SPARE PARTS CLASSIFICATION

Activity based classification (ABC) method can sorted the

spare parts into A (the particularly important inventory), B
(the general inventory), C (the secondary inventory) classes
according to the cost of items and amount of usage [8]. The
core idea of ABC method is to distinguish between the higher
cost spare parts account for a smaller portion of the all
inventory and a large number of the secondary spare parts
according to the technical or economic characteristics of
equipment.
The classification steps are as follows [9]:
1) The cost of each spare parts is calculated as a
percentage of the total cost of spare parts inventory.
2) The spare parts are ranked in descending order of the
percentage of each spare parts inventory cost to the total
inventory cost.
3) The graph is plotted with percentage of spare part
inventory used on X axis and the percentage of its cost on the
Y axis as shown in Figure. 1.

Figure.1 Activity based classification for spare parts inventory

Considering the importance of repair materials and the

particularity of power supply enterprise, the distribution
network spare parts inventory are divided into A, B (including
B1 and B2) two classes in this paper.
III.

SPARE PARTS DEMAND FORECASTING

A. Basic principle of SVM forecasting algorithm

Based on the statistical learning theory, Support Vector
Machine (SVM) algorithm is a kind of novel machine learning
method compared with Neural networks heuristic learning
mode, which is implemented with a great deal of experience
and of a more rigorous theoretical and mathematical
foundations[10]. The basic idea of SVM is applying the kernel
function to nonlinearly map the training set from the input
space to a high-dimensional space, solving convex
optimization problems (typical quadratic programming
problem) in the high-dimensional space to get the global
optimal solution [11].
The training set can be expressed as {(xi , yi ), i = 1, 2,..., l} ,

and xi = [ x1i , x2i ,..., xdi ]T , which is the i-th input column vector
of training sample, yi is the corresponding output value. The
regression problem is to find a mapping from the input space
to the output space, f : R d R , f (x) = y . For linear
problems, SVM regression function can be expressed as
follows [1]:
y = f (x) = ( w x) + b

(1)

The regression function was established by minimizing the

objective function as follows [2]:
l
1

min [ 2 w + C (i + i )]
i =1

y
w
x
b

+ i , i = 1, 2,..., l

i
i
s.t. y + w x + b +
i
i
i

i 0, i 0

(2)

Where i and i are the slack variables, is the insensitive

loss function, and C is the penalty factor.

by monthly repair schedule, assigning x2 as 1 when there

has repair schedule in the month1,or x2 is 0.

The above formula can be converted to dual form by

introducing Lagrange multipliers as follows [3]:

c) Operating environment of distribution network

equipment: the electricity equipment undertakes different
loading rates under different operating environments. The
harsh operating environment would lead to equipment failure
rate increased, resulting in the demand of spare parts
increasing. This paper take the monthly maximum
temperature to quantify this index as follows [7].

1 l l

*
*
max [ 2 ( i i )( j j )(xi x j )
i =1 j =1

l
l

( i + i* ) + ( i i* ) yi ]

i =1
i =1

( i i ) = 0

i =1
s.t.

0 i C

0 i* C

(3)

For nonlinear problems, we can nonlinearly map the

training set from the original input space to a highdimensional space by adopting the kernel function to replace
the dot product, which can be described as follows [4]:
l

f ( x) = ( i i* ) K (xi , x) + b

(4)

i =1

Where K (xi , x) is the Gauss radial basis function as

follows [5].
K (xi , x) = exp(-

x xi

x3 = T 15 2
( 20 )

(7)

T 15

d) Failure rate of distribition equipment: the higher the

distribiton equipment failure rate, the greater demand for the
equipment spare parts. The failure rate of equipment is
quantified by summarizing the scale of distribution network
equipment and the number of failure caused by various faults
and defects.
2) Spare parts demand forecasting process based on SVM
The flow chart of spare parts demand forecasting based on
SVM is shown in Figure.2.

Quantize the characterizing attributes

(5)

Where C and 2 are the key parameter in SVM model,

respectively.

Construct the
training samples
Input the model
parameters
Train the SVM
forecasting model

B. SVM forecasting model for spare parts inventory

1) Characterizing attributes of sample set in SVM model
Based on the characteristics of distribution network
equipment, distribution network operation experience and the
spare parts historical demand, four characterizing attributes
are considered for the SVM forecasting model in this paper,
as below.
xi = [ x1i , x2i , x3i , x4i ]T

T < 15

Optimal parameters
of SVM model

a) The hisitorical demand data of spare parts for

repairing: The historical demand data of each type material
in each month are got through gathering statistics on
outgoing record for the repair material.
b) repair schedule: The demand of repair material for
a certain period is closely tied to overhaul and repair
schedules. The spare parts demand will increase during the
repair schedule period. The paper quantizes the attribute x2

Meet the accuracy

requirement

Get the forecasting

results

(6)

Where x1 means spare parts history demand for repair,

x2 is repair schedule, x3 is operating environment of
distribution network equipment and x4 means the failure rate
of equipment. The four attributes can be specified in details
as below.

Increase the
training
samples

Save the SVM

forecasting model

Figure.2 The flow chart of spare parts demand forecasting based on SVM

IV.

SPARE PARTS INVENTORY QUOTA

The different inventory quota models are established

respectively for spare parts of Class A and Class B in this
section.
A. Fixed order quantity model
Fixed order quantity (FOQ) model is the event-driven,
that is, whenever the inventory fell to a certain level, the
spare parts will be ordered with a fixed quantity. The order
may occur at any time, so it is mainly determined by the spare
part demand. For FOQ model, the warehouse keeper must

continuously monitor the remaining inventory and refresh the

inventory record to judge whether the inventory has reached
the reorder point.
It is necessary to closely monitor the inventory of Class A
for their importance, so FOQ model is suitable for setting the
inventory quota for spare parts Class A. On one hand, on the
premise of meeting the spare parts demand, the expensive
spare parts of Class A should be maintained in the lowest safe
stock level; on the other hand, a certain safety inventory can
reduce the impact of the prediction inaccuracy and supplier
delivery delay.
Here assuming that the spare parts demand obey normal
distribution, the mean value is d, standard deviation is , the
lead time is LT, then the safety inventory can be calculated as
follows.
D = LT d

(8)

D = LT

(9)

SS = Z D = Z LT

(10)

Where D is the average demand during the lead time, D

is the standard deviation of demand during the lead time, SS
is the safety inventory, ZZ is the safety factor.
Reorder level (ROL) is equal to the sum of the safety
inventory and the demand during lead time.

ROL = D + SS = LT d + Z LT

(11)

The economic order quantity model which considering

ordering cost, carrying cost and material purchasing cost is
used to calculate the order quantity as following equations
(12) and (13).

TC =

Dy S
Q

1
+ Q H + C Dy
2

(12)

Where Dy is the annual demand, S refers to the ordering

cost of each order, Q means the per order amount, H is the
carrying cost of the unit material, C is the purchasing cost of
the unit material, and TC means the annual total cost.
The fix order quantity is calculated by differentiating the
annual total cost, of which result is shown as below.

Q=

2 Dy S

(13)

B. Periodic review model

The periodic review model is the time-driven, that is,
the orders occur at regular intervals with different amount.
According to the actual demand, the periodic review model
adopts the different orders at regular intervals to offset the
effects of the uncertainty factors. Adopting this method, the
actual inventory levels would be checked regularly,
periodically replenishing the stock and keeping the inventory
above the target level.

For class B of the spare parts, the paper applies the

periodic review model to calculate the inventory quota due to
their high demand and low prices. According to different
inspection cycle, the class B can be further divided into Class
B1 with review period at month and Class B2 at one quarter.
The target inventory level can be calculated as follow
function.

TSL = d (T + LT ) + Z T + LT

(14)

Where TSL is the target inventory level, T is the

inspection cycle.
V. CASES STUDIES
This paper takes the distribution network spare parts
inventory of a power supply enterprise in Guangdong as a
practical example, verifying the proposed methods.
Firstly, we apply the ABC method to classify the spare
parts inventory. The classification principles and results are
shown in Table I and Table II.
TABLE I.
Category
Class A
Class B1
Class B2

CLASSIFICATION PRINCIPLES OF ACTIVITY BASED

CLASSIFICATION FOR SPARE PARTS
Cumulative percentage of
spare parts inventory (%)
0% 41%
41% 81%
81% 100%

TABLE II.

Cumulative percentage of
inventory cost (%)
0% 83%
83% 98%
98% 100%

CLASSIFICATION RESULTS OF ACTIVITY BASED

CLASSIFICATION FOR SPARE PARTS

Spare parts
SF6 load switch cabinet
High voltage cable
Column circuit breaker
Oil-filled transformer
Outdoor switch box
Low-voltage switchgear
Dry-type transformer
Box-type transformer
Low tension wire
Cable accessories
Low-tension cable
Outdoor low voltage
distribution box
Column load switch
Overhead insulationcovered lines
PT
Steel core aluminum
stranded wire
Cement pole

Cumulative
percentage of
spare parts
inventory (%)
12.35
18.52
27.16
40.74
45.68
53.09
56.79
61.73
71.60
80.25
85.19

Cumulative
percentage of
inventory
cost (%)
38.47
59.75
73.58
82.81
86.03
89.24
92.05
94.75
96.37
97.48
98.16

87.65

98.80

B2

90.12

99.42

B2

Category
A
A
A
A
B1
B1
B1
B1
B1
B1
B2

92.59

99.80

B2

93.83

99.93

B2

96.30

99.97

B2

100

100

B2

The SVM forecasting model is adopted to predict the

spare parts demand based on the demand data of the power
supply enterprise from 2005 to 2013. And then this paper

takes the column circuit breaker as example to verify the

accuracy of the proposed model.
The parameter selection of C and 2 for SVM model is
of a great influence on forecasting accuracy [12-13]. The
penalty factor C determines the complexity of model and the
punishment for the prediction bias, which can be selected
according to the characteristics of the sample data and
forecasting models. The setting of parameter 2 too large in
the radial basis function will cause the SVM model underfitting, while too small value of 2 would lead to the
problem of over-fitting.
In order to quickly determine the reasonable interval of
the parameters, the particle swarm optimization algorithm
(PSO) and genetic algorithm (GA) are used to optimize the
parameters, among which the population and iterations times
of PSO and GA are both set as 20 and 200, respectively. The
value range of C and 2 are set as [0.1, 100] and [0.01, 1000],
respectively. Finally, the grid traversal algorithm is adopted
for two dimensional optimization after obtaining the
approximate parameter space by PSO and GA algorithm. The
process and results of the parameters optimization in this
forecasting example of the column circuit breaker are shown
in Table III.
TABLE III.

C
4.214
4.539
3.764

Finally the representative items of each class are selected

for inventory quota calculation as samples. The Averages and
standard deviations of the spare parts introduced in Part IV
can be calculated based on the demand forecasting results.
Here selects SF6 load switch cabinet (Class A), cable
accessories (Class B1) and column load switch (Class B2) as
the examples.
The averages and standard deviations of SF6 load switch
cabinet is 13.58 and 9.90 according to the forecasting results,
the lead time is 1 month, the ordering cost of each order is
800 Yuan, the carrying cost of the unit material is 280 Yuan,
the service level is 99.9% and Z is 3.The quota results of SF6
load switch cabinet are shown as below.

SVM PARAMETER OPTIMIZATION RESULTS

Parameters optimization stage

PSO optimization
GA optimization
Grid traversal optimization

occurrence accuracy (ROA) and the mean squared error

(MSE) of SVM model are 91.67% and 1.58 respectively,
while the two indices of BP model are 83.33% and 5.5. The
BP neural network is based on the gradient descent method to
optimize the weight, of which unusually plunges into local
optima [14]. On contrast, the essence of SVM forecasting
algorithm is to solve the quadratic programming problem
with linear constraint, according to equation (3) to (5),
generally, the traditional methods for solving linear
optimization problem is able to get a satisfactory solution,
avoiding local optima. In addition, the demand data of
distribution network spare parts in the Power supply
enterprise is too limited, and many studies suggest that SVM
is suitable for small sample prediction problem, because
SVM algorithm can also find out the optimal hyperplane even
with small sample. However, BP neural network algorithm
need many historical demand data to train the model.

13.93
12.67
13.62

In addition, the paper adopts the BP neural network

forecasting algorithm to compare the forecasting accuracy of
SVM model. The forecasting results of the column circuit
breaker are shown in Figure.3 and Table IV.

SS = Z D = Z LT = 3 9.90 1 30

(15)

ROL = LT d + SS = 113.58 + 30 44

(16)

Q=

2 Dy S

2 12 13.58 800
31
280

(17)

The averages and standard deviations of cable accessories

is 10.21 and 10.06, the lead time is 1 month, the inspection
cycle is 1 month, and the service level is 99.9%. The quota
results of cable accessories are shown as follows.

SS = Z D = Z T + LT = 3 10.06 2 43 (18)
TSL = d (T + LT ) + SS = 10.21 2 + 43 64

For the column load switch, all of the parameters are the
same to cable accessories (B1) except for the inspection cycle.
According to the periodic review model for Class B2, the
inspection cycle of column load switch is 3 months. We can
get the results from formula [20] to [21].

Figure.3 The 2013 prediction results of the column circuit breaker

TABLE IV.

THE 2013 PREDICTION RESULTS OF

THE COLUMN CIRCUIT BREAKER

Model

SS = Z D = Z T + LT = 3 0.83 3 + 1 5 (20)

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

SVM

BP

Actual demand 4

12

10

10

(19)

13

10

12

As can be seen from the table IV, the SVM forecasting

model shows more accurate than BP method. The ratio of

TSL = d (T + LT ) + SS = 0.46 4 + 5 7
VI.

(21)

CONCLUSION

The distribution network spare parts inventory demand

forecasting method based on SVM is proposed in this paper

and the column circuit breaker is taken as a practical example

to verify that the accuracy of the SVM forecasting model is
superior to BP model. In addition, the spare parts are divided
into Class A, Class B1 and Class B2 through the activity
based classification, and then the inventory quota method
based on the different types of inventory management model
is put forward and some typical spare parts of different
classes are selected as example of inventory quota calculation.
The calculation results of actual distribution power network
show that the proposed SVM model is of high prediction
accuracy, providing a simple and effective solution for
inventory equipment management of electricity equipment.

[7]

[8]
[9]

[10]
[11]

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