Lumpy Demand

Items that are sold on an occasional basis are known as "Lumpy Demand" items.  These are common in distribution inventories.  The number in service has no meaning for these items, but they do have some activity during the past two years.  Demand could be high in some months while other months have no activity at all.  Projecting a safety stock for these items is appropriate like "Slow Moving", bit is more a function of which month has the highest demand.  Planning for this peak demand is the key here with lead time and cost being factors as well.  SMS projects a target volume for the coming year and retains a portion of that value as a safety stock.  The calculation takes into account the cost and delivery time of the item then factors it up (or down) according to criticality (i.e., service level).  These items are likely to have a forecast as well as safety stock.