Forecasting and inventory performance in a two-stage supply chain with ARIMA(0,1,1) demand: Theory and empirical analysis

M.Z. Babai, M.M. Ali, J.E. Boylan, A.A. Syntetos

Research output: Contribution to journalArticle

42 Citations (Scopus)

Abstract

The ARIMA(0,1,1) demand model has been analysed extensively by researchers and used widely by forecasting practitioners due to its attractive theoretical properties and empirical evidence in its support. However, no empirical investigations have been conducted in the academic literature to analyse demand forecasting and inventory performance under such a demand model. In this paper, we consider a supply chain formed by a manufacturer and a retailer facing an ARIMA(0,1,1) demand process. The relationship between the forecasting accuracy and inventory performance is analysed along with an investigation on the potential benefits of forecast information sharing between the retailer and the manufacturer. Results are obtained analytically but also empirically by means of experimentation with the sales data related to 329 Stock Keeping Units (SKUs) from a major European superstore. Our analysis contributes towards the development of the current state of knowledge in the areas of inventory forecasting and forecast information sharing and offers insights that should be valuable from the practitioner perspective.
Original languageEnglish
Pages (from-to)463-471
Number of pages9
JournalInternational Journal of Production Economics
Volume143
Issue number2
Early online date9 Sep 2011
DOIs
Publication statusPublished - Jun 2013

Keywords

  • Inventory
  • Forecasting
  • ARIMA demand
  • Supply chain
  • Information sharing

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