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Automatic selection of unobserved components models for supply chain forecasting

Marco A. Villegas and Diego J. Pedregal

International Journal of Forecasting, 2019, vol. 35, issue 1, 157-169

Abstract: For many companies, automatic forecasting has come to be an essential part of business analytics applications. The large amounts of data available, the short life-cycle of the analysis and the acceleration of business operations make traditional manual data analysis unfeasible in such environments. In this paper, an automatic forecasting support system that comprises several methods and models is developed in a general state space framework built in the SSpace toolbox written for Matlab. Some of the models included are well-known, such as exponential smoothing and ARIMA, but we also propose a new model family that has been used only very rarely in this context, namely unobserved components models. Additional novelties include the use of unobserved components models in an automatic identification environment and the comparison of their forecasting performances with those of exponential smoothing and ARIMA models estimated using different software packages. The new system is tested empirically on a daily dataset of all of the products sold by a franchise chain in Spain (166 products over a period of 517 days). The system works well in practice and the proposed automatic unobserved components models compare very favorably with other methods and other well-known software packages in forecasting terms.

Keywords: Automatic forecasting; Model selection; State space; Unobserved components; Kalman filter; Business analytics (search for similar items in EconPapers)
Date: 2019
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