Rethinking Inventory Forecasting Problems in E-commerce: Exploring the effect of integrating forecasting and inventory decisions

Abstract

Forecasting for inventory control is the process of calculating the inventory needs to fulfill future consumer demand. In general, this process is divided into two sub-processes. The first sub-process receives the current inventory information and forecasts future information, e.g. forecasts future demand from the demand information in the past. The second sub-process uses the forecast information as input to make inventory decisions, e.g. use a product demand forecast to decide how many units of this product to buy. Recent works highlight the importance of integrating forecasting with final inventory decisions, however, there is very little empirical evidence to support that integrating the decision is the best solution. In this work, we propose to explore the effect of integrating the inventory decision into the forecasting problem and compare it with the state-of-the-art approaches. For this, we evaluated the approaches in different operational tasks belonging to our business. Our preliminary findings show that predicting operative decisions instead of demand information could be better and the benefit can be capitalized even in low data scenarios.