Model retraining and information sharing in a supply chain with long-term fluctuating demands

Abstract

Demand forecasting based on empirical data is a viable approach for optimizing a supply chain. However, in this approach, a model constructed from past data occasionally becomes outdated due to long-term changes in the environment, in which case the model should be updated (i.e., retrained) using the latest data. In this study, we examine the effects of updating models in a supply chain using a minimal setting. We demonstrate that when each party in the supply chain has its own forecasting model, uncoordinated model retraining causes the bullwhip effect even if a very simple replenishment policy is applied. Our results also indicate that sharing the forecasting model among the parties involved significantly reduces the bullwhip effect.