Evaluation of the reliability of a combined forecasting and lot-sizing system

To establish production plans or replenishment plans, firms use forecasting systems. Such a system is composed of a forecasting method and a lot-sizing method. We propose a scheme to evaluate the reliability of such a system. This evaluation is based on the impact of demand randomness on the long run total cost. The scheme is illustrated with a system including an exponential smoothing technique for the demand forecasting and the Florian and Klein method for the lot-sizing. Simulation results show that such a system is quite reliable.