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The cost impact of using simple forecasting techniques in a supply chain

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  • Heung‐Kyu Kim
  • Jennifer K. Ryan

Abstract

In this paper we consider an inventory model in which the retailer does not know the exact distribution of demand and thus must use some observed demand data to forecast demand. We present an extension of the basic newsvendor model that allows us to quantify the value of the observed demand data and the impact of suboptimal forecasting on the expected costs at the retailer. We demonstrate the approach through an example in which the retailer employs a commonly used forecasting technique, exponential smoothing. The model is also used to quantify the value of information and information sharing for a decoupled supply chain in which both the retailer and the manufacturer must forecast demand. © 2003 Wiley Periodicals, Inc. Naval Research Logistics 50: 388–411, 2003

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  • Heung‐Kyu Kim & Jennifer K. Ryan, 2003. "The cost impact of using simple forecasting techniques in a supply chain," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(5), pages 388-411, August.
    • Handle: RePEc:wly:navres:v:50:y:2003:i:5:p:388-411
    DOI: 10.1002/nav.10065
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    References listed on IDEAS

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    Cited by:

    1. Rupesh Kumar Pati, 2014. "Modelling Bullwhip Effect in a Closed Loop Supply Chain with ARMA Demand," IIM Kozhikode Society & Management Review, , vol. 3(2), pages 149-164, July.
    2. Saoud, Patrick & Kourentzes, Nikolaos & Boylan, John E., 2022. "Approximations for the Lead Time Variance: a Forecasting and Inventory Evaluation," Omega, Elsevier, vol. 110(C).
    3. Michna, Zbigniew & Disney, Stephen M. & Nielsen, Peter, 2020. "The impact of stochastic lead times on the bullwhip effect under correlated demand and moving average forecasts," Omega, Elsevier, vol. 93(C).

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