Inventory – forecasting: Mind the gap

We are concerned with the interaction and integration between demand forecasting and inventory control, in the context of supply chain operations. The majority of the literature is fragmented. Forecasting research more often than not assumes forecasting to be an end in itself, disregarding any subsequent stages of computation that are needed to transform forecasts into replenishment decisions. Conversely, most contributions in inventory theory assume that demand (and its parameters) are known, in effect disregarding any preceding stages of computation. Explicit recognition of these shortcomings is an important step towards more realistic theoretical developments, but still not particularly helpful unless they are somehow addressed. Even then, forecasts often constitute exogenous variables that serially feed into a stock control model. Finally, there is a small but growing stream of research that is explicitly built around jointly tackling the inventory forecasting question.