A new forecasting scheme for evaluating long-term prediction performances in supply chain management

Abstract

Supply chain management (SCM) practitioners in inventory sites are often required to predict the future sales of products in order to meet customer demands and reduce inventory costs simultaneously. Although a variety of forecasting methods have been developed, many of them may not be used in practice for various reasons, such as insufficient viable information about sales and oversophisticated methods. In this paper, we provide a new forecasting scheme to evaluate long-term prediction performances in SCM. Three well-known forecasting methods for time series datamoving average (MA), autoregressive integrated MA, and smoothing splineare considered. We also focus on two representative sales patterns, each of which is with and without a growth pattern, respectively. By applying the proposed scheme to various simulated and real datasets, this research aims to provide SCM practitioners with a general guideline for time series sales forecasting, so that they can easily understand what prediction performance measures and which forecasting method can be considered.