An adaptive multi-objective optimal forecast combination and its application for predicting intermittent demand

While time series forecasting models are generally trained by optimising certain forms of error, the end-user’s forecasting needs in a multi-objective setting can be broader, and often mutually conflicting. A production manager may prioritise high product fill rates and low average inventory resulting from a forecast over just low error. The conflict among multiple objectives is notably worrisome in intermittent demand forecasting, where error-minimising approaches can devalue the practitioner’s objectives. To address such forecasting problems, we propose an Adaptive Multi-objective Optimal Combination (AMOC) of forecasts which incorporates the end-user’s preferences across multiple objectives. We demonstrate the use of AMOC in a real-life application of intermittent demand forecasting for optimising four distinct inventory management objectives using five specialised forecasting methods across single-period and multi-period inventory handling scenarios. Additionally, we conduct a comprehensive experiment on a subset of M5 competition data to exhibit the robustness of the AMOC using 13 diverse forecasting methods and four statistical objectives.