Automated Demand Forecasting in small to medium-sized enterprises

TL;DR

This paper introduces an automated sales forecasting pipeline tailored for small- to medium-sized enterprises, combining multiple models and validation to improve accuracy without requiring specialized data science resources.

Contribution

It develops a comprehensive, automated forecasting pipeline for SMEs that integrates diverse models and validation, addressing resource limitations and improving forecast accuracy.

Findings

Model diversity enhances forecasting accuracy.

Performance varies across different SMEs.

Ensemble methods can outperform individual models.

Abstract

In response to the growing demand for accurate demand forecasts, this research proposes a generalized automated sales forecasting pipeline tailored for small- to medium-sized enterprises (SMEs). Unlike large corporations with dedicated data scientists for sales forecasting, SMEs often lack such resources. To address this, we developed a comprehensive forecasting pipeline that automates time series sales forecasting, encompassing data preparation, model training, and selection based on validation results. The development included two main components: model preselection and the forecasting pipeline. In the first phase, state-of-the-art methods were evaluated on a showcase dataset, leading to the selection of ARIMA, SARIMAX, Holt-Winters Exponential Smoothing, Regression Tree, Dilated Convolutional Neural Networks, and Generalized Additive Models. An ensemble prediction of these models was also included. Long-Short-Term Memory (LSTM) networks were excluded due to suboptimal prediction accuracy, and Facebook Prophet was omitted for compatibility reasons. In the second phase, the proposed forecasting pipeline was tested with SMEs in the food and electric industries, revealing variable model performance across different companies. While one project-based company derived no benefit, others achieved superior forecasts compared to naive estimators. Our findings suggest that no single model is universally superior. Instead, a diverse set of models, when integrated within an automated validation framework, can significantly enhance forecasting accuracy for SMEs. These results emphasize the importance of model diversity and automated validation in addressing the unique needs of each business. This research contributes to the field by providing SMEs access to state-of-the-art sales forecasting tools, enabling data-driven decision-making and improving operational efficiency.