P. Alstrom et P. Madsen, EVALUATION OF FORECAST MODELS USED FOR INVENTORY CONTROL DURING A PRODUCTS LIFE-CYCLE - A SIMULATION STUDY, International journal of production economics, 35(1-3), 1994, pp. 191-200
This article analyses the consequences of using different exponential
smoothing models in inventory control. The evaluation of forecast mode
ls has received much attention in the literature. In most articles, fo
recast models have been evaluated using statistical criteria, such as
average forecast error and mean square error. From the point of view o
f inventory control, however, it is more interesting to examine the fo
recast model's impact on inventory control performance as measured by,
for example, the resulting costs - including holding costs, order cos
ts and shortage costs. The method used is stochastic simulation, with
which it is possible to simulate the practical application of forecast
models together with theoretical inventory models. The simulations ar
e carried out for a product whose probability distribution of demand i
s the normal distribution with a mean described by a traditional life
cycle, to which both 6- and 12-month seasons have been added, and both
constant and time-dependent standard deviations. In this analysis, it
is assumed that inventory is controlled by an (s,Q) system, where the
order quantity is calculated using the EOQ formula, and the reorder p
oint is determined using an inventory model based on the minimisation
of order costs, holding costs and shortage costs.