Forecasting of Purchase Dependent Power Demands using Vector Autoregressive Model as Basis for Inventory Policy in a Retailer

Ai, The Jin and Astanti, Ririn Diar and Wardoyo, Maria Monika (2016) Forecasting of Purchase Dependent Power Demands using Vector Autoregressive Model as Basis for Inventory Policy in a Retailer. In: Asia Pacific Industrial Engineering and Management Systems Conference, 7 - 10 December 2016, Taipei, Taiwan.

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Abstract

Retailer is the stage in the supply chain that has responsibility to deliver the product to end customer. Nowadays, due to the advanced of the information technology, e-retailer (electronic retailer) is increasing in number. However, sometimes a retailer uses both e-retailer and traditional retailer to sell the same product to the end customer. This situation increases the complexity of managing inventory in that type of retailer. In addition, the type of the product sold by retailer, i.e. the product that have purchase dependent power, make the problem of managing inventory in the retailer become more complex. In this paper, the preliminary research was conducted in an apparel store in order to observe that two different products have purchase dependent power, i.e. demand of product A is affecting demand of product B, and vice versa. Then, a vector autoregressive VAR(1) model is being used as the reference forecasting model for the demand pattern. It is expected that the forecasting model can be used as basis for determining inventory policy for two products with purchase dependent power.

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