Demand forecasting accuracy in the pharmaceutical supply chain: a machine learning approach

Abstract

PurposeDemand foresting significantly impacts supply chain (SC) design and recovery planning. The more accurate the demand forecast, the better the recovery plan and the more resilient the SC. Given the paucity of research about machine learning (ML) applications and the pharmaceutical industry’s need for disruptive techniques, this study aims to investigate the applicability and effect of ML algorithms on demand forecasting. More specifically, the study identifies machine learning algorithms applicable to demand forecasting and assess the forecasting accuracy of using ML in the pharmaceutical SC.Design/methodology/approachThis research used a single-case explanatory methodology. The exploratory approach examined the study’s objective and the acquisition of information technology impact. In this research, three experimental designs were carried out to test training data partitioning, apply ML algorithms and test different ranges of exclusion factors. The Konstanz Information Miner platform was used in this research.FindingsBased on the analysis, this study could show that the most accurate training data partition was 80%, with random forest and simple tree outperforming other algorithms regarding demand forecasting accuracy. The improvement in demand forecasting accuracy ranged from 10% to 41%.Research limitations/implicationsThis study provides practical and theoretical insights into the importance of applying disruptive techniques such as ML to improve the resilience of the pharmaceutical supply design in such a disruptive time.Originality/valueThe finding of this research contributes to the limited knowledge about ML applications in demand forecasting. This is manifested in the knowledge advancement about the different ML algorithms applicable in demand forecasting and their effectiveness. Besides, the study at hand offers guidance for future research in expanding and analyzing the applicability and effectiveness of ML algorithms in the different sectors of the SC.