Forecasting for inventory control with exponential smoothing
Exponential smoothing, often used for sales forecasting in inventory control, has always been rationalized in terms of statistical models that possess errors with constant variances. It is shown in this paper that exponential smoothing remains the appropriate approach under more general conditions where the variances are allowed to grow and contract with corresponding movements in the underlying level. The implications for estimation and prediction are explored. In particular the problem of finding the prediction distribution of aggregate lead- time demand for use in inventory control calculations is considered. It is found that unless a drift term is added to simple exponential smoothing, the prediction distribution is largely unaffected by the variance assumption. A method for establishing order-up-to levels and reorder levels directly from the simulated prediction distributions is also proposed.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- P. J. Harrison, 1967. "Exponential Smoothing and Short-Term Sales Forecasting," Management Science, INFORMS, vol. 13(11), pages 821-842, July.
- Snyder, R.D. & Koehler, A.B. & Ord, J.K., 1998. "Lead Time demand for Simple Exponential Smoothing," Monash Econometrics and Business Statistics Working Papers 13/98, Monash University, Department of Econometrics and Business Statistics.
- William S. Lovejoy, 1990. "Myopic Policies for Some Inventory Models with Uncertain Demand Distributions," Management Science, INFORMS, vol. 36(6), pages 724-738, June.
- Koehler, A.B. & Snyder, R.D. & Ord, J.K., 1999.
"Forecasting Models and Prediction Intervals for the Multiplicative Holt-Winters Method,"
Monash Econometrics and Business Statistics Working Papers
1/99, Monash University, Department of Econometrics and Business Statistics.
- Koehler, Anne B. & Snyder, Ralph D. & Ord, J. Keith, 2001. "Forecasting models and prediction intervals for the multiplicative Holt-Winters method," International Journal of Forecasting, Elsevier, vol. 17(2), pages 269-286.
- Ord, J.K. & Koehler, A. & Snyder, R.D., 1995. "Estimation and Prediction for a Class of Dynamic Nonlinear Statistical Models," Monash Econometrics and Business Statistics Working Papers 4/95, Monash University, Department of Econometrics and Business Statistics.
- Harvey, Andrew & Snyder, Ralph D., 1990. "Structural time series models in inventory control," International Journal of Forecasting, Elsevier, vol. 6(2), pages 187-198, July.
- Peter R. Winters, 1960. "Forecasting Sales by Exponentially Weighted Moving Averages," Management Science, INFORMS, vol. 6(3), pages 324-342, April.
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:18:y:2002:i:1:p:5-18. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.