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Formation of seasonal groups and application of seasonal indices

Boylan, JE, Chen, H, Mohammadipour, M and Syntetos, A 2014, 'Formation of seasonal groups and application of seasonal indices' , Journal of the Operational Research Society, 65 (2) , pp. 227-241.

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Abstract

Estimating seasonal variations in demand is a challenging task faced by many organisations. There may be many stock-keeping units (SKUs) to forecast, but often data histories are short, with very few complete seasonal cycles. It has been suggested in the literature that group seasonal indices (GSI) methods should be used to take advantage of information on similar SKUs. This paper addresses two research questions: (1) how should groups be formed in order to use the GSI methods? and (2) when should the GSI methods and the individual seasonal indices (ISI) method be used? Theoretical results are presented, showing that seasonal grouping and forecasting may be unified, based on a Mean Square Error criterion, and K-means clustering. A heuristic K-means method is presented, which is competitive with the Average Linkage method. It offers a viable alternative to a company's own grouping method or may be used with confidence if a company lacks a grouping method. The paper gives empirical findings that confirm earlier theoretical results that greater accuracy may be obtained by employing a rule that assigns the GSI method to some SKUs and the ISI method to the remainder.

Item Type: Article
Schools: Schools > Salford Business School
Journal or Publication Title: Journal of the Operational Research Society
Refereed: Yes
ISSN: 0160-5682
Depositing User: S Rafiq
Date Deposited: 06 May 2014 16:24
Last Modified: 17 Oct 2016 14:14
URI: http://usir.salford.ac.uk/id/eprint/31669

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