Forecasting for inventory planning: a 50-year review

Abstract

Forecasting and planning for inventory management has received considerable attention from the Operational Research (OR) community over the last 50 years because of its implications for decision making, both at the strategic level of an organization and at the operational level. Many influential contributions have been made in this area, reflecting different perspectives that have evolved in divergent strands of the literature, namely: system dynamics, control theory and forecasting theory (both statistical and judgemental). Although this pluralism is healthy in terms of knowledge advancement, it also signifies the fragmentation of the OR discipline and the lack of cross-fertilization of ideas to develop more comprehensive approaches towards the resolution of the same issues. In this paper, the relevant literature is reviewed and synthesized to promote some convergence between these different approaches to inventory forecasting and planning. The review concludes with an inter-disciplinary agenda for further research.

Keywords:

• forecasting
• inventory management
• system dynamics
• control theory

Acknowledgements

The conceptual work described in this paper has been funded by the Engineering and Physical Sciences Research Council (EPSRC, UK) Grant no. EP/F012632/1. More information on this project may be obtained at http://www.mams.salford.ac.uk/CORAS/Projects/Bridging_the_Gap/.

Notes

1 Control theory is the inter-disciplinary branch of mathematics and engineering that deals with the behaviour of dynamical systems. Its applications overlap with many of the interests of the OR community, such as production and inventory problems, machine maintenance, and replacement and marketing. The interface between control theory and OR is discussed in Sethi and Thompson (2000).