Using shared sell-through data to forecast wholesaler demand in multi-echelon supply chains

Abstract

Operational forecasting in supply chain management supports a variety of short-term planning decisions, such as production scheduling and inventory management. In this respect, improving short-term forecast accuracy is a way to build a more agile supply chain for manufacturing companies. Demand forecasting often relies on well-established univariate forecasting methods to extrapolate historical demand. Collaboration across the supply chain, including information sharing, is suggested in the literature to improve upon the forecast accuracy of such traditional methods. In this paper, we review empirical studies considering the use of downstream information in demand forecasting and investigate different modeling approaches and forecasting methods to incorporate such data. Where empirical findings on information sharing mainly focus on point-of-sale data in two-level supply chains, this research empirically investigates the added value of using sell-through data originating from intermediaries, next to historical demand figures, in a multi-echelon supply chain. In a case study concerning a US drug manufacturer, we evaluate different methods to incorporate this data and consider both time series methods and machine learning techniques to produce multi-step ahead weekly forecasts. The results show that the manufacturer can effectively improve its short-term forecast accuracy by integrating sell-through data into the forecasting process and provide useful insights as to the different modeling approaches used. The conclusion holds for all forecast horizons considered, though it is most pronounced for one-step ahead forecasts. Therefore, our research provides a clear incentive for manufacturers to assess the forecast accuracy that can be achieved by using sell-through data.