Formation of seasonal groups and application of seasonal indices

Boylan, John E. and Chen, Huijing and Mohammadipour, Maryam and Syntetos, Aris A. (2014) Formation of seasonal groups and application of seasonal indices. Journal of the Operational Research Society, 65 (2). pp. 227-241. ISSN 0160-5682

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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
Keywords (uncontrolled): forecasting; seasonality; grouping; clustering
Research Areas: A. > Business School > International Management and Innovation
Item ID: 14529
Notes on copyright: This is a post-peer-review, pre-copyedit version of an article published in Journal of the Operational Research Society. The definitive publisher-authenticated version J E Boylan, H Chen, M Mohammadipour & A Syntetos (2017) Formation of seasonal groups and application of seasonal indices, Journal of the Operational Research Society, 65:2, 227-241, DOI: 10.1057/jors.2012.126 is available online at: http://dx.doi.org/10.1057/jors.2012.126
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Depositing User: Maryam Mohammadipour
Date Deposited: 14 Apr 2015 15:25
Last Modified: 06 Sep 2018 12:29
URI: http://eprints.mdx.ac.uk/id/eprint/14529

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