Efficient Warehouse and Inventory Management: The Modified ABC XYZ Analysis as a Framework to Integrate Demand Forecasting and Inventory Control

Despite the evident connections between Demand Forecasting and Inventory Control, both researchers and practitioners tend to perform and analyze these issues separately. Yet, the application of appropriate Demand Forecasting Methods promises meeting inventory related target values while reducing inventory costs. A significant challenge consists in identifying the appropriate Demand Forecasting Method. Thus, practitioners require a framework that supports the decision process of selecting said method. Depending on the chosen forecasting method, different configurations of an inventory control policy might be suitable. The aim of this work is to facilitate the complex task of connecting the forecasting method selection and inventory control policy configuration for a group of numerous and heterogeneous products. Thus, a simple framework that generates recommendations regarding the appropriate forecasting method and inventory policy will be devised and empirically tested. Two of the three suggested forecast methods will be investigated further. An example application shows that the concept enables a significant reduction of stockouts which translates to higher service levels. The proposed methods therefore contribute to efficient and economically sustainable warehouse operations and inventory control management.