In the rapidly evolving retail landscape, accurate forecasting of sales volume for perishable goods is crucial. This thesis presents a comparative analysis of forecasting methods focusing on channel-specific and weekday/weekend segmented data versus Common Use aggregated approaches. Employing advanced reconciliation techniques, the study seeks to determine the most effective forecasting method. Results indicate that segmentation provides a more accurate prediction of sales volume, offering significant insights for retailers in managing perishable goods inventory. Using a unique dataset on sales by a large US retailer, we compare the different approaches for forecasting weekly sales volume series of different items. This research contributes to a deeper understanding of retail dynamics and enhances
forecasting practices in the context of perishable goods. This thesis introduces a novel cost function to enhance the accuracy and financial relevance of sales volume forecasting for perishable goods. By innovatively blending traditional forecasting methods with this unique cost function, the study provides valuable insights into optimizing inventory management and reducing financial risks in the retail sector.

Abstract ..................................................................................................................................................... 1
Acknowledgements................................................................................................................................... 2
List of Tables ............................................................................................................................................ 5
List of Figures........................................................................................................................................... 6
Chapter 1: Introduction ............................................................................................................................. 8
1.1 Background and Rationale ......................................................................................................... 8
1.2 Research Objectives................................................................................................................... 9
1.3 Scope ........................................................................................................................................ 10
1.4 Structure of the Thesis.............................................................................................................. 10
Chapter 2: Literature Review.................................................................................................................. 11
2.1 Overview of Retail Forecasting................................................................................................ 11
2.2 Challenges in Perishable Goods Forecasting ........................................................................... 13
2.3 Aggregated vs. Disaggregated Forecasting Approaches.......................................................... 14
2.4 Cost Implications of Forecast Accuracy .................................................................................. 15
2.5 Reconciliation Methods in Forecasting within Retail .............................................................. 17
Chapter 3: Data & Methods.................................................................................................................... 20
3.1 Data Description....................................................................................................................... 20
3.2 Forecasting Methods ................................................................................................................ 21
3.3 Development of the Cost Function........................................................................................... 23
4
3.4 Reconciliation Techniques....................................................................................................... 26
3.5 Analytical Tools and Software (R and the fable package)....................................................... 27
Chapter 4: Data Analysis ........................................................................................................................ 29
4.1 Data Preprocessing and Exploration ........................................................................................ 29
4.2 Forecasting Models Applied .................................................................................................... 34
4.3 Cost Function Application........................................................................................................ 37
4.4 Reconciliation Process ............................................................................................................. 39
Chapter 5: Results and Discussion.......................................................................................................... 41
5.1 Comparison of Forecasting Methods and Financial Implications of Forecast Accuracy......... 41
5.2 Effectiveness of Reconciliation in Forecasting ........................................................................ 47
5.3 Interpretation of Results........................................................................................................... 48
5.4 Implications for Retail Industry ............................................................................................... 50
Chapter 6: Conclusion and Recommendations....................................................................................... 52
6.1 Summary of Findings............................................................................................................... 52
6.2 Practical Implications............................................................................................................... 53
6.3 Limitations of the Study........................................................................................................... 55
6.4 Recommendations for Future Research ................................................................................... 56
References............................................................................................................................................... 58
Appendix................................................................................................................................................. 60

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