On the interaction between forecasting and stock control: The case of non‐stationary demand

On the interaction between forecasting and stock control: The case of non‐stationary demand

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Article ID: iaor20116494
Volume: 133
Issue: 1
Start Page Number: 470
End Page Number: 480
Publication Date: Sep 2011
Journal: International Journal of Production Economics
Authors: , , ,
Keywords: control processes, stochastic processes, simulation: applications, forecasting: applications
Abstract:

The effect of using estimated (forecast) demand parameters on the performance of an inventory control system is an intriguing and important subject. Recent research has been undertaken on this phenomenon assuming stationary demand data. In this paper we extend the research to non‐stationary demands, by means of simulation. The case of a periodic order‐up‐to‐level inventory system is considered and the experimental structure allows us to evaluate in a progressive manner the accumulated effect of using the optimal forecasting method, optimal forecast parameters and correct variance expression procedures. The results allow insights to be gained into operational issues and demonstrate the scope for improving stock control systems.

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