Formation of seasonal groups and application of seasonal indices

Article


Boylan, J., 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. https://doi.org/10.1057/jors.2012.126
TypeArticle
TitleFormation of seasonal groups and application of seasonal indices
AuthorsBoylan, J., Chen, H., Mohammadipour, M. and Syntetos, A.
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.

Keywordsforecasting; seasonality; grouping; clustering
PublisherPalgrave Macmillan
JournalJournal of the Operational Research Society
ISSN0160-5682
Publication dates
Online13 Mar 2013
Print01 Feb 2014
Online21 Dec 2017
Publication process dates
Deposited14 Apr 2015
Accepted01 Aug 2012
Output statusPublished
Accepted author manuscript
Copyright Statement

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

Digital Object Identifier (DOI)https://doi.org/10.1057/jors.2012.126
LanguageEnglish
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