One thing that bothers me when I read posts on social media or papers in peer-reviewed journals is the claim that a proposed approach is “assumption-free.” In forecasting, this is never true. Such an approach is like a spherical unicorn in a vacuum (see image above). Here’s why. Every model is a simplification of reality, […]
Christmas and the New Year are upon us, and I wanted to publish a celebratory post before taking a break. Instead of writing something educational, I decided to simply recommend a paper for you to read over the holidays – something you might have overlooked in the past couple of years. Here it is or […]
I’ve seen several times ML experts applying principles of classification for intermittent demand forecasting. For example, they try predicting, WHEN the demand will happen. This is not a very sensible thing to do. The featured image in this post shows two forecasting approaches: one that tries to predict when demand happens (the yellow line), and […]
While Naive is considered a standard benchmark in forecasting, there is a case where it might not be a good one: intermittent demand. And here is why I think so. Naive is a forecasting method that uses the last available observation as a forecast for the next ones. It does not have any parameters to […]
Anna Sroginis and I have been working on a new approach for intermittent demand classification over the past year. We’ve taken a fresh look at the problem, starting by asking: why do zeroes happen? Let’s discuss why indeed. First, a quick note: it’s a mistake to define intermittent demand simply as “demand with zeroes”. That […]
Is there such thing as “Time series forecasting”? I personally don’t like this term and think that we should use a different one. Which one? Come with me in this post to find out. I understand why people use the term “Time series forecasting” – they want to show the type of data they work […]
Another question my students sometimes ask is how to define the sizes for the training and test sets in a forecasting experiment. If you’ve done data mining or machine learning, you’re likely familiar with this concept. But when it comes to forecasting, there are a few nuances. Let’s discuss. First and foremost, in forecasting, the […]
One of the questions my students sometimes ask is how to set the forecast horizon. The answer depends largely on the task at hand, but there are still some guidelines. First, the forecast horizon depends on data granularity. A “year ahead” forecast on monthly data means forecasting 12 steps ahead, while for daily data, it […]
Look at the image above. Which forecast seems more appropriate: the red straight line (1) or the purple wavy line (2)? Many demand planners might choose option 2, thinking it better captures the ups and downs. But, in many cases, the straight line is just fine. Here’s why. In a previous post on Structure vs. […]
You’ve probably heard the phrase “all forecasts are wrong”, suggesting that the future is unpredictable and that no forecast will ever match the actual outcome. Well, this phrase is not entirely correct, and here’s why. When your favourite forecasting approach generates point forecasts, it usually provides a conditional mean. This means it’s giving you the […]