Value of combining forecasts in inventory management - a case study in banking

Chi Kin Chan, Brian G. Kingsman, H. Wong

Research output: Journal article publicationJournal articleAcademic researchpeer-review

15 Citations (Scopus)

Abstract

Managing inventories in the face of uncertain stochastic demand requires an investment in safety stocks. These are related to the accuracy in forecasting future demands and the noise in the demand generation process. Reducing the demand forecasting error can free up capital and space, and reduce the operating costs of managing the inventories. A leading bank in Hong Kong consumes more than three hundred kinds of printed forms for its daily operations. A major problem of its inventory control system for the forms management is to forecast the monthly demand of these forms. In this study the idea of combining forecasts is introduced and its practical application is addressed. The individual forecasts come from well established time series models and the weights for combination are estimated with Quadratic Programming. The combined forecast is found to perform better than any of the individual forecasts.
Original languageEnglish
Pages (from-to)199-210
Number of pages12
JournalEuropean Journal of Operational Research
Volume117
Issue number2
DOIs
Publication statusPublished - 1 Sep 1999

ASJC Scopus subject areas

  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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