Combining Probabilistic Forecasts of Intermittent Demand

Abstract

In recent decades, new methods and approaches have been developed for forecasting intermittent demand series. However, the majority of research has focused on point forecasting, with little exploration into probabilistic intermittent demand forecasting. This is despite the fact that probabilistic forecasting is crucial for effective decision-making under uncertainty and inventory management. Additionally, most literature on this topic has focused solely on forecasting performance and has overlooked the inventory implications, which are directly relevant to intermittent demand. To address these gaps, this study aims to construct probabilistic forecasting combinations for intermittent demand while considering both forecasting accuracy and inventory control utility in obtaining combinations and evaluating forecasts. Our empirical findings demonstrate that combinations perform better than individual approaches for forecasting intermittent demand, but there is a trade-off between forecasting and inventory performance.