AN ADAPTIVE FORECASTING MODEL
Date
2011-04-01
Authors
Da Silva, Paulo Ferreira
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Abstract
Newspapers are considered the fastest moving consumer goods in the country,
with a shelf life of only a couple of hours. Since the publishers carry the
responsibility for over or under stocking newsprint products in the various retail
stores, they employ a number of ‘allocation’ staff who manually modify a
simplified forecasting technique to ensure that the optimal number of
newspapers are delivered to each retailer in Gauteng. As it is common for the
cost of newspaper production to equal or sometimes exceed the newspaper
retail price, the correct allocation of newspaper copies carries a financial benefit
to the publishers. To achieve a more accurate copy allocation, this research
employs the Holt-Winter forecasting methodology, coupled with an adaptive
closed loop algorithm. The closed loop algorithm automatically adjusts the Holt-
Winter forecast to ensure that the number of copies allocated to each of the
retailers is optimised. This is done to maximise the newspaper sale volume
while reducing the volume produced, thus minimising the number of unsold
newspaper copies and the associated financial losses attributed to overproduction.
The adaptive forecasts were produced on an aggregated and disaggregated
level. The aggregated method was used to forecast on a macro level, prior to
the allocation of the individual copies at each retailer. Whilst this method
performed well in comparison to the existing heuristic forecasting method, the
forecast accuracy actually lays in the correct allocation of the aggregated
forecasted result. The disaggregated method was used to forecast the number
newspapers to be supplied at a retailer level. The adaptive disaggregated
forecasting method not only achieved a reduction in the volume of unsold
newspaper copies, but also a reduction of sales volume. Therefore, neither the
adaptive aggregated or disaggregated forecast models achieved the objective
of maximising newspaper sales while simultaneously reducing the volume of
unsold newspapers.
Description
MBA - WBS
Keywords
Forecasting, Newspapers