Feature-based intermittent demand forecast combinations: bias, accuracy and inventory implications

Abstract

Intermittent demand forecasting is a ubiquitous and challenging problem in operations and supply chain management. There has been a growing focus on developing forecasting approaches for intermittent demand from academic and practical perspectives in recent years. However, limited attention has been given to forecast combination methods, which have been proved to achieve competitive performance in forecasting fast-moving time series. The current study aims to examine the empirical outcomes of some existing forecast combination methods, and propose a generalized feature-based framework for intermittent demand forecasting. We conduct a simulation study to perform a large-scale comparison of a series of combination methods based on an intermittent demand classification scheme. Further, a real data set is used to investigate the forecasting performance and offer insights with regards the inventory performance of the proposed framework by considering some complementary error measures. The proposed framework leads to a significant improvement in forecast accuracy and offers the potential of flexibility and interpretability in inventory control.