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Filtering Outliers

In: Demand Forecasting for Inventory Control

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  • Nick T. Thomopoulos

    (Illinois Institute of Technology)

Abstract

A primary goal of forecasting is to measure the flow of demands from the history months and project to the future months with a minimum forecast error. A way to enhance this goal is by filtering the history demands to seek out any outlier demands and adjust accordingly. As demonstrated in the prior chapter, outlier demands cause much damage to the forecasts and increase the forecast error. Filtering of the demand history is not an easy process, but is important to yield forecasts with minimal forecast error. Reducing the forecast error will reduce the amount of safety stock needed to run the inventory operation. This chapter shows a way to seek out and adjust any outlier demands from the history months when the demand patterns are of the horizontal, trend or seasonal type. The filtering process takes place just prior to generating the forecasts.

Suggested Citation

  • Nick T. Thomopoulos, 2015. "Filtering Outliers," Springer Books, in: Demand Forecasting for Inventory Control, edition 127, chapter 9, pages 119-136, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-11976-2_9
    DOI: 10.1007/978-3-319-11976-2_9
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