Judging the judges through accuracy-implication metrics: The case of inventory forecasting
A number of research projects have demonstrated that the efficiency of inventory systems does not relate directly to demand forecasting performance, as measured by standard forecasting accuracy measures. When a forecasting method is used as an input to an inventory system, it should therefore always be evaluated with respect to its consequences for stock control through accuracy implications metrics, in addition to its performance on the standard accuracy measures. In this paper we address the issue of judgementally adjusting statistical forecasts for 'fast' demand items, and the implications of such interventions in terms of both forecast accuracy and stock control, with the latter being measured through inventory volumes and service levels achieved. We do so using an empirical dataset from the pharmaceutical industry. Our study allows insights to be gained into the combined forecasting and inventory performance of judgemental estimates. It also aims to advance the practice of forecasting competitions by arguing for the consideration of additional (stock control) metrics when such exercises take place in an inventory context.
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- John Boylan & Aris Syntetos, 2006. "Accuracy and Accuracy Implication Metrics for Intermittent Demand," Foresight: The International Journal of Applied Forecasting, International Institute of Forecasters, issue 4, pages 39-42, June.
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- Everette S. Gardner, 1990. "Evaluating Forecast Performance in an Inventory Control System," Management Science, INFORMS, vol. 36(4), pages 490-499, April.
- Syntetos, Aris A. & Nikolopoulos, Konstantinos & Boylan, John E. & Fildes, Robert & Goodwin, Paul, 2009. "The effects of integrating management judgement into intermittent demand forecasts," International Journal of Production Economics, Elsevier, vol. 118(1), pages 72-81, March.
- Makridakis, Spyros & Hibon, Michele, 2000. "The M3-Competition: results, conclusions and implications," International Journal of Forecasting, Elsevier, vol. 16(4), pages 451-476.
- Fildes, Robert & Goodwin, Paul & Lawrence, Michael & Nikolopoulos, Konstantinos, 2009. "Effective forecasting and judgmental adjustments: an empirical evaluation and strategies for improvement in supply-chain planning," International Journal of Forecasting, Elsevier, vol. 25(1), pages 3-23.
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