Estimating a retailer's base stock level: an optimal distribution center order forecast policy

Errors in order forecasts are a salient source of inefficiencies in retail supply chains. Many operational decisions made by suppliers hinge on order forecasts, which typically are based solely on either order or point‐of‐sale (POS) history. Using a discrete‐time formulation, this research demonstrates that if a supplier knows that a retailer is using a base stock policy, it should use that knowledge to forecast the retailer's orders, even if the supplier does not know the base stock level and/or have access to POS data.