Damped trend forecasting and the order-up-to replenishment policy

Li, Qinyun ORCID: https://orcid.org/0000-0001-5978-1903 and Disney, Stephen Michael ORCID: https://orcid.org/0000-0003-2505-9271 2012. Damped trend forecasting and the order-up-to replenishment policy. Presented at: 17th International Working Seminar of Production Economics, Innsbruck, Austria, 20-24 February 2012.

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Abstract

We develop a z-transform transfer function model of the Damped Trend forecasting mechanism from which we determine its stability boundary. We show that the Damped Trend forecasting mechanism is stable for a much larger proportion of the parametrical space than is currently acknowledged in the literature. We incorporate the Damped Trend forecasting mechanism into an Order-Up-To (OUT) replenishment policy and investigate the frequency response of this system. We prove that Naïve, Exponential Smoothing and Holts forecasts, when used within the OUT policy, will always generate bullwhip, for every possible demand process, for any lead-time. However, the Damped Trend forecasting mechanism, when used within the OUT policy, behaves differently. Sometimes it will generate bullwhip and sometimes it will not. Bullwhip avoidance occurs when demand is dominated by low frequencies in some instances. In other instances bullwhip avoidance happens at high frequencies. We are also able to demonstrate a complex odd-even lead-time effect exists. Bullwhip may be avoided when the lead-time is odd for a particular demand pattern, but re-appears when the lead-time changes to an even number.

Item Type:	Conference or Workshop Item (Paper)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics) Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC)
Subjects:	H Social Sciences > HB Economic Theory
Uncontrolled Keywords:	Damped Trend, Forecasting, Order-Up-To Replenishment Policy, Bullwhip, Stability
Date of First Compliant Deposit:	31 July 2017
Last Modified:	20 Oct 2022 09:57
URI:	https://orca.cardiff.ac.uk/id/eprint/33630

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