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  • Trapero 2018 quantile-forecast-optimal

    Rights statement: This is the author’s version of a work that was accepted for publication in International Journal of Forecasting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Forecasting, 35, 1, 2019 DOI: 10.1016/j.ijforecast.2018.05.009

    Accepted author manuscript, 323 KB, PDF document

    Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

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Quantile forecast optimal combination to enhance safety stock estimation

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>01/2019
<mark>Journal</mark>International Journal of Forecasting
Issue number1
Volume35
Number of pages12
Pages (from-to)239-250
Publication StatusPublished
Early online date27/08/18
<mark>Original language</mark>English

Abstract

The safety stock calculation requires a measure of the forecast error uncertainty. Such errors are usually assumed to be Gaussian iid (independently and identically distributed). However, deviations from iid lead to a deterioration in the performance of the supply chain. Recent research has shown that, contrary to theoretical approaches, empirical techniques that do not rely on the aforementioned assumptions can enhance the calculation of safety stocks. In particular, GARCH models cope with time-varying heterocedastic forecast error, and kernel density estimation does not need to rely on a determined distribution. However, if the forecast errors are time-varying heterocedastic and do not follow a determined distribution, the previous approaches are inadequate. We overcome this by proposing an optimal combination of the empirical methods that minimizes the asymmetric piecewise linear loss function, also known as the tick loss. The results show that combining quantile forecasts yields safety stocks with a lower cost. The methodology is illustrated with simulations and real data experiments for different lead times.

Bibliographic note

This is the author’s version of a work that was accepted for publication in International Journal of Forecasting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Journal of Forecasting, 35, 1, 2019 DOI: 10.1016/j.ijforecast.2018.05.009