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Predictive Big Data Analytics For Supply Chain Demand Forecasting: Methods, Applications, and Research Opportunities

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Predictive Big Data Analytics For Supply Chain Demand Forecasting: Methods, Applications, and Research Opportunities

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Seyedan and Mafakheri J Big Data (2020) 7:53

https://doi.org/10.1186/s40537-020-00329-2

SURVEY PAPER Open Access

Predictive big data analytics for supply chain


demand forecasting: methods, applications,
and research opportunities
Mahya Seyedan and Fereshteh Mafakheri*

*Correspondence:
f.mafakheri@concordia.ca Abstract
Concordia Institute Big data analytics (BDA) in supply chain management (SCM) is receiving a growing
for Information Systems
Engineering (CIISE), attention. This is due to the fact that BDA has a wide range of applications in SCM,
Concordia University, including customer behavior analysis, trend analysis, and demand prediction. In this
Montreal H3G 1M8, Canada survey, we investigate the predictive BDA applications in supply chain demand fore-
casting to propose a classification of these applications, identify the gaps, and provide
insights for future research. We classify these algorithms and their applications in sup-
ply chain management into time-series forecasting, clustering, K-nearest-neighbors,
neural networks, regression analysis, support vector machines, and support vector
regression. This survey also points to the fact that the literature is particularly lacking
on the applications of BDA for demand forecasting in the case of closed-loop supply
chains (CLSCs) and accordingly highlights avenues for future research.
Keywords: Demand forecasting, Supply chain management, Closed-loop supply
chains, Big data analytics, Machine-learning

Introduction
Nowadays, businesses adopt ever-increasing precision marketing efforts to remain com-
petitive and to maintain or grow their margin of profit. As such, forecasting models have
been widely applied in precision marketing to understand and fulfill customer needs and
expectations [1]. In doing so, there is a growing attention to analysis of consumption
behavior and preferences using forecasts obtained from customer data and transaction
records in order to manage products supply chains (SC) accordingly [2, 3].
Supply chain management (SCM) focuses on flow of goods, services, and information
from points of origin to customers through a chain of entities and activities that are con-
nected to one another [4]. In typical SCM problems, it is assumed that capacity, demand,
and cost are known parameters [5]. However, this is not the case in reality, as there are
uncertainties arising from variations in customers’ demand, supplies transportation,
organizational risks and lead times. Demand uncertainties, in particular, has the great-
est influence on SC performance with widespread effects on production scheduling,

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Seyedan and Mafakheri J Big Data (2020) 7:53 Page 2 of 22

inventory planning, and transportation [6]. In this sense, demand forecasting is a key
approach in addressing uncertainties in supply chains [7–9].
A variety of statistical analysis techniques have been used for demand forecasting in
SCM including time-series analysis and regression analysis [10]. With the advancements
in information technologies and improved computational efficiencies, big data analytics
(BDA) has emerged as a means of arriving at more precise predictions that better reflect
customer needs, facilitate assessment of SC performance, improve the efficiency of SC,
reduce reaction time, and support SC risk assessment [11].
The focus of this meta-research (literature review) paper is on “demand forecasting”
in supply chains. The characteristics of demand data in today’s ever expanding and spo-
radic global supply chains makes the adoption of big data analytics (and machine learn-
ing) approaches a necessity for demand forecasting. The digitization of supply chains
[12] and incoporporation Blockchain technologies [13] for better tracking of supply
chains further highlights the role of big data analytics. Supply chain data is high dimen-
sional generated across many points in the chain for varied purposes (products, supplier
capacities, orders, shipments, customers, retailers, etc.) in high volumes due to plurality
of suppliers, products, and customers and in high velocity reflected by many transac-
tions continuously processed across supply chain networks. In the sense of such com-
plexities, there has been a departure from conventional (statistical) demand forecasting
approaches that work based on identifying statistically meannignful trends (character-
ized by mean and variance attributes) across historical data [14], towards intelligent
forecasts that can learn from the historical data and intelligently evolve to adjust to
predict the ever changing demand in supply chains [15]. This capability is established
using big data analytics techniques that extract forecasting rules through discovering the
underlying relationships among demand data across supply chain networks [16]. These
techniques are computationally intensive to process and require complex machine-pro-
grammed algorithms [17].
With SCM efforts aiming at satisfying customer demand while minimizing the total
cost of supply, applying machine-learning/data analytics algorithms could facilitate pre-
cise (data-driven) demand forecasts and align supply chain activities with these predic-
tions to improve efficiency and satisfaction. Reflecting on these opportunities, in this
paper, first a taxonmy of data sources in SCM is proposed. Then, the importance of
demand management in SCs is investigated. A meta-research (literature review) on BDA
applications in SC demand forecasting is explored according to categories of the algo-
rithms utilized. This review paves the path to a critical discussion of BDA applications
in SCM highlighting a number of key findings and summarizing the existing challenges
and gaps in BDA applications for demand forecasting in SCs. On that basis, the paper
concludes by presenting a number of avenues for future research.

Data in supply chains


Data in the context of supply chains can be categorized into customer, shipping, deliv-
ery, order, sale, store, and product data [18]. Figure 1 provides the taxonomy of supply
chain data. As such, SC data originates from different (and segmented) sources such as
sales, inventory, manufacturing, warehousing, and transportation. In this sense, compe-
tition, price volatilities, technological development, and varying customer commitments
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 3 of 22

Fig. 1 Taxonomy of supply chain data

could lead to underestimation or overestimation of demand in established forecasts [19].


Therefore, to increase the precision of demand forecast, supply chain data shall be care-
fully analyzed to enhance knowledge about market trends, customer behavior, suppli-
ers and technologies. Extracting trends and patterns from such data and using them to
improve accuracy of future predictions can help minimize supply chain costs [20, 21].
Analysis of supply chain data has become a complex task due to (1) increasing mul-
tiplicity of SC entities, (2) growing diversity of SC configurations depending on the
homogeneity or heterogeneity of products, (3) interdependencies among these entities
(4) uncertainties in dynamical behavior of these components, (5) lack of information as
relate to SC entities; [11], (6) networked manufacturing/production entities due to their
increasing coordination and cooperation to achieve a high level customization and adap-
taion to varying customers’ needs [22], and finally (7) the increasing adoption of supply
chain digitization practices (and use of Blockchain technologies) to track the acitivities
across supply chains [12, 13].
Big data analytics (BDA) has been increasingly applied in management of SCs [23], for
procurement management (e.g., supplier selection [24], sourcing cost improvement [25],
sourcing risk management [26], product research and development [27], production
planning and control [28], quality management [29], maintenance, and diagnosis [30],
warehousing [31], order picking [32], inventory control [33], logistics/transportation
(e.g., intelligent transportation systems [34], logistics planning [35], in-transit inventory
management [36], demand management (e.g., demand forecasting [37], demand sensing
[38], and demand shaping [39]. A key application of BDA in SCM is to provide accurate
forecasting, especially demand forecasting, with the aim of reducing the bullwhip effect
[14, 40–42].
Big data is defined as high-volume, high-velocity, high-variety, high value, and
high veracity data requiring innovative forms of information processing that enable
enhanced insights, decision making, and process automation [43]. Volume refers to
the extensive size of data collected from multiple sources (spatial dimension) and
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 4 of 22

over an extended period of time (temporal dimension) in SCs. For example, in case
of freight data, we have ERP/WMS order and item-level data, tracking, and freight
invoice data. These data are generated from sensors, bar codes, Enterprise resource
planning (ERP), and database technologies. Velocity can be defined as the rate of gen-
eration and delivery of specific data; in other words, it refers to the speed of data
collection, reliability of data transferring, efficiency of data storage, and excavation
speed of discovering useful knowledge as relate to decision-making models and algo-
rithms. Variety refers to generating varied types of data from diverse sources such
as the Internet of Things (IoT), mobile devices, online social networks, and so on.
For instance, the vast data from SCM are usually variable due to the diverse sources
and heterogeneous formats, particularly resulted from using various sensors in manu-
facturing sites, highways, retailer shops, and facilitated warehouses. Value refers to
the nature of the data that must be discovered to support decision-making. It is the
most important yet the most elusive, of the 5 Vs. Veracity refers to the quality of data,
which must be accurate and trustworthy, with the knowledge that uncertainty and
unreliability may exist in many data sources. Veracity deals with conformity and accu-
racy of data. Data should be integrated from disparate sources and formats, filtered
and validated [23, 44, 45]. In summary, big data analytics techniques can deal with a
collection of large and complex datasets that are difficult to process and analyze using
traditional techniques [46].
The literature points to multiple sources of big data across the supply chains with
varied trade-offs among volume, velocity, variety, value, and veracity attributes [47].
We have summarized these sources and trade-offs in Table 1. Although, the demand
forecasts in supply chains belong to the lower bounds of volume, velocity, and variety,
however, these forecasts can use data from all sources across the supply chains from
low volume/variety/velocity on-the-shelf inventory reports to high volume/variety/
velocity supply chain tracking information provided through IoT. This combination
of data sources used in SC demand forecasts, with their diverse temporal and spatial
attributes, places a greater emphasis on use of big data analytics in supply chains, in
general, and demand forecasting efforts, in particular.
The big data analytics applications in supply chain demand forecasting have been
reported in both categories of supervised and unsupervised learning. In supervised
learning, data will be associated with labels, meaning that the inputs and outputs
are known. The supervised learning algorithms identify the underlying relationships
between the inputs and outputs in an effort to map the inputs to corresponding out-
puts given a new unlabeled dataset [48]. For example, in case of a supervised learning
model for demand forecasting, future demand can be predicted based on the histori-
cal data on product demand [41]. In unsupervised learning, data are unlabeled (i.e.
unknown output), and the BDA algorithms try to find the underlying patterns among
unlabeled data [48] by analyzing the inputs and their interrelationships. Customer
segmentation is an example of unsupervised learning in supply chains that clusters
different groups of customers based on their similarity [49]. Many machine-learn-
ing/data analytics algorithms can facilitate both supervised learning (extracting the
input–output relationships) and unsupervised learning (extracting inputs, outputs
and their relationships) [41].
Table 1 Data sources classification in SC
Data sources Procurement Transportation Demand chain Warehouse Volume Velocity Variety
operations
Low Medium High Low Medium High Low Medium High
Seyedan and Mafakheri J Big Data

EDI invoices * * * *
EDI purchase orders * * * *
Crowd-based Pickup and Delivery * * * *
GPS-enabled big data telematics * * * *
(2020) 7:53

Intelligent Transport Systems * * * *


Traffic density * * * *
Transportation costs * * * *
CRM transaction data * * * *
Customer location and channel * * * * *
Customer surveys * * * *
Demand forecasts * * * *
Loyalty program * * * * *
Twitter feeds * * * *
Web logs * * * *
Delivery expedite instances * * * * *
Delivery times and terms * * * * * *
Claims data * * * * *
Competitor pricing * * * * *
Bar code systems * * * * * *
Origination and destination (OND) * * * * *
Facebook status * * * * *
Mobile location * * * * *
Weather data * * * * * *
Page 5 of 22
Seyedan and Mafakheri J Big Data
(2020) 7:53

Table 1 (continued)
Data sources Procurement Transportation Demand chain Warehouse Volume Velocity Variety
operations
Low Medium High Low Medium High Low Medium High
Blogs and news * * * * * *
Call logs voice audio * * * * * *
Internet of things sensing * * * * * *
RFID * * * * * *
Call center logs * * * * * * * *
Email records * * * * * * *
ERP transaction data * * * * * * *
Machine-generated data * * * * * * * *
On-shelf-availability * * * * * * * *
Page 6 of 22
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 7 of 22

Demand management in supply chains


The term “demand management” emerged in practice in the late 1980s and early 1990s.
Traditionally, there are two approaches for demand management. A forward approach
which looks at potential demand over the next several years and a backward approach
that relies on past or ongoing capabilities in responding to demand [50].
In forward demand management, the focus will be on demand forecasting and plan-
ning, data management, and marketing strategies. Demand forecasting and planning
refer to predicting the quantities and timings of customers’ requests. Such predictions
aim at achieving customers’ satisfaction by meeting their needs in a timely manner [51].
Accurate demand forecasting could improve the efficiency and robustness of produc-
tion processes (and the associated supply chains) as the resources will be aligned with
requirements leading to reduction of inventories and wastes [52, 53].
In the light of the above facts, there are many approaches proposed in the litera-
ture and practice for demand forecasting and planning. Spreadsheet models, statisti-
cal methods (like moving averages), and benchmark-based judgments are among these
approaches. Today, the most widely used demand forecasting and planning tool is Excel.
The most widespread problem with spreadsheet models used for demand forecast-
ing is that they are not scalable for large-scale data. In addition, the complexities and
uncertainties in SCM (with multiplicity and variability of demand and supply) cannot
be extracted, analyzed, and addressed through simple statistical methods such as mov-
ing averages or exponential smoothing [50]. During the past decade, traditional solu-
tions for SC demand forecasting and planning have faced many difficulties in driving
the costs down and reducing inventories [50]. Although, in some cases, the suggested
solutions have improved the day’s payable, they have pushed up the SC costs as a burden
to suppliers.
The era of big data and high computing analytics has enabled data processing at a large
scale that is efficient, fast, easy, and with reduced concerns about data storage and col-
lection due to cloud services. The emergence of new technologies in data storage and
analytics and the abundance of quality data have created new opportunities for data-
driven demand forecasting and planning. Demand forecast accuracy can be significantly
improved with data-mining algorithms and tools that can sift through data, analyze the
results, and learn about the relationships involved. This could lead to highly accurate
demand forecasting models that learn from data and are scalable for application in SCM.
In the following section, a review of BDA applications in SCM is presented. These appli-
cations are categorized based on the employed techniques in establishing the data-drive
demand forecasts.

BDA for demand forecasting in SCM


This survey aims at reviewing the articles published in the area of demand and sales
forecasting in SC in the presence of big data to provide a classification of the litera-
ture based on algorithms utilized as well as a survey of applications. To the best of
our knowledge, no comprehensive review of the literature specifically on SC demand
forecasting has been conducted with a focus on classification of techniques of data
analytics and machine learning. In doing so, we performed a thorough search of the
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 8 of 22

14

12

10

Frequency
8

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
Fig. 2 Distribution of literature in supply chain demand forecasting from 2005 to 2019

Table 2 Literature on BDA/machine learning techniques for supply chain demand


forecasting (2005–2019)
Rank Technique Frequency

1 Neural networks 30
2 Regression 27
3 Time-series forecasting (ARIMA) 13
4 Support vector machine 8
5 Decision tree 8

existing literature, through Scopus, Google Scholar, and Elsevier, with publication
dates ranging from 2005 to 2019. The keywords used for the search were supply chain,
demand forecasting, sales forecasting, big data analytics, and machine learning.
Figure 2 shows the trend analysis of publications in demand forecasting for SC
appeared from 2005 to 2019. There is a steadily increasing trend in the number of
publications from 2005 to 2019. It is expected that such growth continues in 2020.
Reviewing the past 15 years of research on big data analysis/machine learning appli-
cations in SC demand forecasting, we identified 64 research papers (excluding books,
book chapters, and review papers) and categorized them with respect to the method-
ologies adopted for demand forecasting. The five most frequently used techniques are
listed in Table 2 that includes “Neural Network,” “Regression”, “Time-series forecast-
ing (ARIMA)”, “Support Vector Machine”, and “Decision Tree” methods. This table
implies the growing use of big data analysis techniques in SC demand forecasting. It
shall be mentioned that there were a few articles using multiple of these techniques.
It shall be mentioned that there are literature review papers exploring the use of big
data analytics in SCM [10, 16, 23, 54–67]. However, this study focuses on the specific
topic of “demand forecasting” in SCM to explore BDA applications in line with this
particular subtopic in SCM.
As Hofmann and Rutschmann [58] indicated in their literature review, the key
questions to answer are why, what and how big data analytics/machine-learning
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 9 of 22

algorithms could enhance forecasts’ accuracy in comparison to conventional statisti-


cal forecasting approaches.
Conventional methods have faced a number of limitations for demand forecasting
in the context of SCs. There are a lot of parameters influencing the demand in supply
chains, however, many of them were not captured in studies using conventional methods
for the sake of simplicity. In this regard, the forecasts could only provide a partial under-
standing of demand variations in supply chains. In addition, the unexplained demand
variations could be simply considered as statistical noise. Conventional approaches
could provide shorter processing times in exchange for a compromise on robustness and
accuracy of predictions. Conventional SC demand forecasting approaches are mostly
done manually with high reliance on the planner’s skills and domain knowledge. It would
be worthwhile to fully automate the forecasting process to reduce such a dependency
[58]. Finally, data-driven techniques could learn to incorporate non-linear behaviors and
could thus provide better approximations in demand forecasting compared to conven-
tional methods that are mostly derived based on linear models. There is a significant
level of non-linearity in demand behavior in SC particularly due to competition among
suppliers, the bullwhip effect, and mismatch between supply and demand [40].
To extract valuable knowledge from a vast amount of data, BDA is used as an advanced
analytics technique to obtain the data needed for decision-making. Reduced operational
costs, improved SC agility, and increased customer satisfaction are mentioned among
the benefits of applying BDA in SCM [68]. Researchers used various BDA techniques
and algorithms in SCM context, such as classification, scenario analysis, and optimiza-
tion [23]. Machine-learning techniques have been used to forecast demand in SCs, sub-
ject to uncertainties in prices, markets, competitors, and customer behaviors, in order to
manage SCs in a more efficient and profitable manner [40].
BDA has been applied in all stages of supply chains, including procurement, ware-
housing, logistics/transportation, manufacturing, and sales management. BDA consists
of descriptive analytics, predictive analytics, and prescriptive analytics. Descriptive
analysis is defined as describing and categorizing what happened in the past. Predic-
tive analytics are used to predict future events and discover predictive patterns within
data by using mathematical algorithms such as data mining, web mining, and text min-
ing. Prescriptive analytics apply data and mathematical algorithms for decision-making.
Multi-criteria decision-making, optimization, and simulation are among the prescriptive
analytics tools that help to improve the accuracy of forecasting [10].
Predictive analytics are the ones mostly utilized in SC demand and procurement fore-
casting [23]. In this sense, in the following subsections, we will review various predic-
tive big data analytics approaches, presented in the literature for demand forecasting in
SCM, categorized based on the employed data analytics/machine learning technique/
algorithm, with elaborations of their purpose and applications (summarized in Table 3).

Time‑series forecasting
Time series are methodologies for mining complex and sequential data types. In time-
series data, sequence data, consisting of long sequences of numeric data, recorded
at equal time intervals (e.g., per minute, per hour, or per day). Many natural and
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 10 of 22

Table 3 Literature on applications of predictive BDA in SC demand forecasting (2005


to 2019)
Literature (2005–2019) Predictive BDA techniques Demand forecasting
SC application
ANN Clustering KNN Regression SVM SVR TSF

Chang et al. [91] ✔ Printed circuit boards


Levis and Papageorgiou ✔ Electrical appliances
[116]
Chi et al. [117] ✔ Calendars
Sun et al. [118] ✔ Fashion retails
Efendigil et al. [119] ✔ Durable consumer goods
Lee and Ou-Yang [120] ✔ Supplier bidding
Chen et al. [121] ✔ Wafer tests
Thomassey [105] ✔ Clothings
Wu [95] ✔ Cars
Wu [122] ✔ Cars
Guanghui [96] ✔ ✔ Paper and Cards
Babai et al. [123] ✔ Superstore retails
Kourentzes [124] ✔ Automotive spare parts
Lau et al. [125] ✔ Gasoline
Da Veiga et al. [73] ✔ Dairy products
Jun et al. [37] ✔ Hybrid cars
Ma et al. [71] ✔ Smartphones
Arunraj and Ahrens [126] ✔ ✔ Food retails
Blackburn et al. [7] ✔ Chemicals
Gaur et al. [81] ✔ Walmart SC
Islek and Oguducu [100] ✔ Dried nuts and fruits
Murray et al. [74] ✔ Bulk materials
Ramos et al. [75] ✔ Retails sector (footwear)
Saha et al. [90] ✔ Server manufacturing
Di Pillo et al. [127] ✔ ✔ Retails sector
Liu et al. [86] ✔ Furniture
Nikolopoulos et al. [80] ✔ Automotive spare parts
da Veiga et al. [128] ✔ ✔ Foodstuff retails
Vhatkar and Dias [84] ✔ ✔ Oral care products
Amirkolaii et al. [88] ✔ Aircraft spare parts
Bohanec et al. [17] ✔ ✔ Toys
Chen and Lu [98] ✔ Computer retails
Huber et al. [19] ✔ ✔ Bakery products
Chawla et al. [129] ✔ Walmart
Huang et al. [89] ✔ ✔ E-logistics
Loureiro et al. [102] ✔ ✔ ✔ Fashion retails
Pereira et al. [130] ✔ Scrap tires
Yang and Sutrisno [93] ✔ ✔ Perishable goods
Villegas et al. [94] ✔ ✔ Personal care products
Yuan et al. [87] ✔ E-logistics
Fanoodi et al. [131] ✔ ✔ Blood cells (platelet)
Kilimci et al. [101] ✔ ✔ ✔ Discount stores
Merkuryeva et al. [92] ✔ ✔ Pharmaceuticals
Puspita et al. [104] ✔ ✔ Forklifts
Punam et al. [103] ✔ ✔ ✔ Online grocery
Sharma and Singhal ✔ ✔ Automotive/industrial
[132] lubricants
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 11 of 22

Table 3 (continued)
Literature (2005–2019) Predictive BDA techniques Demand forecasting
SC application
ANN Clustering KNN Regression SVM SVR TSF

Tanizaki et al. [133] ✔ Restaurant supplies


Wang and Chen [134] ✔ ✔ ✔ Chip manufacturing
Zhu et al. [15] ✔ ✔ ✔ Seeds

human-made processes, such as stock markets, medical diagnosis, or natural phenom-


enon, can generate time-series data. [48].
In case of demand forecasting using time-series, demand is recorded over time at
equal size intervals [69, 70]. Combinations of time-series methods with product or mar-
ket features have attracted much attention in demand forecasting with BDA. Ma et al.
[71] proposed and developed a demand trend-mining algorithm for predictive life cycle
design. In their method, they combined three models (a) a decision tree model for large-
scale historical data classification, (b) a discrete choice analysis for present and past
demand modeling, and (c) an automated time-series forecasting model for future trend
analysis. They tested and applied their 3-level approach in smartphone design, manufac-
turing and remanufacturing.
Time-series approach was used for forecasting of search traffic (service demand)
subject to changes in consumer attitudes [37]. Demand forecasting has been achieved
through time-series models using exponential smoothing with covariates (ESCov) to
provide predictions for short-term, mid-term, and long-term demand trends in the
chemical industry SCs [7]. In addition, Hamiche et al. [72] used a customer-responsive
time-series approach for SC demand forecasting.
In case of perishable products, with short life cycles, having appropriate (short-term)
forecasting is extremely critical. Da Veiga et al. [73] forecasted the demand for a group
of perishable dairy products using Autoregressive Integrated Moving Average (ARIMA)
and Holt-Winters (HW) models. The results were compared based on mean absolute
percentage error (MAPE) and Theil inequality index (U-Theil). The HW model showed a
better goodness-of-fit based on both performance metrics.
In case of ARIMA, the accuracy of predictions could diminish where there exists a
high level of uncertainty in future patterns of parameters [42, 74–76]. HW model fore-
casting can yield better accuracy in comparison to ARIMA [73]. HW is simple and easy
to use. However, data horizon could not be larger than a seasonal cycle; otherwise, the
accuracy of forecasts will decrease sharply. This is due to the fact that inputs of an HW
model are themselves predicted values subject to longer-term potential inaccuracies and
uncertainties [45, 73].

Clustering analysis
Clustering analysis is a data analysis approach that partitions a group of data objects into
subgroups based on their similarities. Several applications of clustering analysis has been
reported in business analytics, pattern recognition, and web development [48]. Han et al.
[48] have emphasized the fact that using clustering customers can be organized into
groups (clusters), such that customers within a group present similar characteristic.
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 12 of 22

A key target of demand forecasting is to identify demand behavior of customers.


Extraction of similar behavior from historical data leads to recognition of customer clus-
ters or segments. Clustering algorithms such as K-means, self-organizing maps (SOMs),
and fuzzy clustering have been used to segment similar customers with respect to their
behavior. The clustering enhances the accuracy of SC demand forecasting as the predic-
tions are established for each segment comprised of similar customers. As a limitation,
the clustering methods have the tendency to identify the customers, that do not follow a
pattern, as outliers [74, 77].
Hierarchical forecasts of sales data are performed by clustering and categorization of
sales patterns. Multivariate ARIMA models have been used in demand forecasting based
on point-of-sales data in industrial bakery chains [19]. These bakery goods are ordered
and clustered daily with a continuous need to demand forecasts in order to avoid both
shortage or waste [19]. Fuel demand forecasting in thermal power plants is another
domain with applications of clustering methods. Electricity consumption patterns are
derived using a clustering of consumers, and on that basis, demand for the required fuel
is established [77].

K‑nearest‑neighbor (KNN)
KNN is a method of classification that has been widely used for pattern recognition.
KNN algorithm identifies the similarity of a given object to the surrounding objects
(called tuples) by generating a similarity index. These tuples are described by n attrib-
utes. Thus, each tuple corresponds to a point in an n-dimensional space. The KNN algo-
rithm searches for k tuples that are closest to a given tuple [48]. These similarity-based
classifications will lead to formation of clusters containing similar objects. KNN can also
be integrated into regression analysis problems [78] for dimensionality reduction of the
data [79]. In the realm of demand forecasting in SC, Nikolopoulos et al. [80] applied
KNN for forecasting sporadic demand in an automotive spare parts supply chain. In
another study, KNN is used to forecast future trends of demand for Walmart’s supply
chain planning [81].

Artificial neural networks


In artificial neural networks, a set of neurons (input/output units) are connected to one
another in different layers in order to establish mapping of the inputs to outputs by find-
ing the underlying correlations between them. The configuration of such networks could
become a complex problem, due to a high number of layers and neurons, as well as vari-
ability of their types (linear or nonlinear), which needs to follow a data-driven learning
process to be established. In doing so, each unit (neuron) will correspond to a weight,
that is tuned through a training step [48]. At the end, a weighted network with minimum
number of neurons, that could map the inputs to outputs with a minimum fitting error
(deviation), is identified.
As the literature reveals, artificial neural networks (ANN) are widely applied for
demand forecasting [82–85]. To improve the accuracy of ANN-based demand pre-
dictions, Liu et al. [86] proposed a combination of a grey model and a stacked auto
encoder applied to a case study of predicting demand in a Brazilian logistics company
subject to transportation disruption [87]. Amirkolaii et al. [88] applied neural networks
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 13 of 22

in forecasting spare parts demand to minimize supply chain shortages. In this case of
spare parts supply chain, although there were multiple suppliers to satisfy demand for
a variety of spare parts, the demand was subject to high variability due to a varying
number of customers and their varying needs. Their proposed ANN-based forecasting
approach included (1) 1 input demand feature with 1 Stock-Keeping Unit (SKU), (2) 1
input demand feature with all SKUs, (3) 16 input demand features with 1 SKU, and (4) 16
input demand features with all SKUs. They applied neural networks with back propaga-
tion and compared the results with a number of benchmarks reporting a Mean Square
Error (MSE) for each configuration scenario.
Huang et al. [89] compared a backpropagation (BP) neural network and a linear regres-
sion analysis for forecasting of e-logistics demand in urban and rural areas in China
using data from 1997 to 2015. By comparing mean absolute error (MAE) and the average
relative errors of backpropagation neural network and linear regression, they showed
that backpropagation neural networks could reach higher accuracy (reflecting lower dif-
ferences between predicted and actual data). This is due to the fact that a Sigmoid func-
tion was used as the transfer function in the hidden layer of BP, which is differentiable
for nonlinear problems such as the one presented in their case study, whereas the linear
regression works well with linear problems.
ANNs have also been applied in demand forecasting for server models with one-week
demand prediction ahead of order arrivals. In this regard, Saha et al. [90] proposed an
ANN-based forecasting model using a 52-week time-series data fitted through both
BP and Radial Basis Function (RBF) networks. A RBF network is similar to a BP net-
work except for the activation/transfer function in RBF that follows a feed-forward
process using a radial basis function. RBF results in faster training and convergence to
ANN weights in comparison with BP networks without compromising the forecasting
precision.
Researchers have combined ANN-based machine-learning algorithms with optimiza-
tion models to draw optimal courses of actions, strategies, or decisions for future. Chang
et al. [91] employed a genetic algorithm in the training phase of a neural network using
sales/supply chain data in the printed circuit board industry in Taiwan and presented an
evolving neural network-forecasting model. They proposed use of a Genetic Algorithms
(GA)-based cost function optimization to arrive at the best configuration of the corre-
sponding neural network for sales forecast with respect to prediction precision. The pro-
posed model was then compared to back-propagation and linear regression approaches
using three performance indices of MAPE, Mean Absolute Deviation (MAD), and Total
Cost Deviation (TCD), presenting its superior prediction precision.

Regression analysis
Regression models are used to generate continuous-valued functions utilized for predic-
tion. These methods are used to predict the value of a response (dependent) variable
with respect to one or more predictor (independent) variables. There are various forms
of regression analysis, such as linear, multiple, weighted, symbolic (random), polyno-
mial, nonparametric, and robust. The latter approach is useful when errors fail to satisfy
normalcy conditions or when we deal with big data that could contain significant num-
ber of outliers [48].
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 14 of 22

Merkuryeva et al. [92] analyzed three prediction approaches for demand forecasting
in the pharmaceutical industry: a simple moving average model, multiple linear regres-
sions, and a symbolic regression with searches conducted through an evolutionary
genetic programming. In this experiment, symbolic regression exhibited the best fit with
the lowest error.
As perishable products must be sold due to a very short preservation time, demand
forecasting for this type of products has drawn increasing attention. Yang and Sutrisno
[93] applied and compared regression analysis and neural network techniques to derive
demand forecasts for perishable goods. They concluded that accurate daily forecasts are
achievable with knowledge of sales numbers in the first few hours of the day using either
of the above methods.

Support vector machine (SVM)


SVM is an algorithm that uses a nonlinear mapping to transform a set of training data
into a higher dimension (data classes). SVM searches for an optimal separating hyper-
plane that can separate the resulting class from another) [48]. Villegas et al. [94] tested
the applicability of SVMs for demand forecasting in household and personal care SCs
with a dataset comprised of 229 weekly demand series in the UK. Wu [95] applied an
SVM, using a particle swarm optimization (PSO) to search for the best separating hyper-
plane, classifying the data related to car sales and forecasting the demand in each cluster.

Support vector regression (SVR)


Continuous variable classification problems can be solved by support vector regression
(SVR), which is a regression implementation of SVM. The main idea behind SVR regres-
sion is the computation of a linear regression function within a high-dimensional feature
space. SVR has been applied in financial/cost prediction problems, handwritten digit
recognition, and speaker identification, object recognition, etc. [48].
Guanghui [96] used the SVR method for SC needs prediction. The use of SVR in
demand forecasting can yield a lower mean square error than RBF neural networks due
to the fact that the optimization (cost) function in SVR does not consider the points
beyond a margin of distance from the training set. Therefore, this method leads to
higher forecast accuracy, although, similar to SVM, it is only applicable to a two-class
problem (such as normal versus anomaly detection/estimation problems). Sarhani and
El Afia [97] sought to forecast SC demand using SVR and applied Particle swarm optimi-
zation (PSO) and GA to optimize SVR parameters. SVR-PSO and SVR-GA approaches
were compared with respect to accuracy of predictions using MAPE. The results showed
a superior performance by PSO in terms time intensity and MAPE when configuring the
SVR parameters.

Mixed approaches
Some works in the literature have used a combination of the aforementioned techniques.
In these studies, the data flow into a sequence of algorithms and the outputs of one stage
become inputs of the next step. The outputs are explanatory in the form of qualitative
and quantitative information with a sequence of useful information extracted out of
each algorithm. Examples of such studies include [15, 98–105].
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 15 of 22

In more complex supply chains with several points of supply, different warehouses,
varied customers, and several products, the demand forecasting becomes a high dimen-
sional problem. To address this issue, Islek and Oguducu [100] applied a clustering
technique, called bipartite graph clustering, to analyze the patterns of sales for different
products. Then, they combined a moving average model and a Bayesian belief network
approaches to improve the accuracy of demand forecasting for each cluster. Kilimci et al.
[101] developed an intelligent demand forecasting system by applying time-series and
regression methods, a support vector regression algorithm, and a deep learning model
in a sequence. They dealt with a case involving big amount of data accounting for 155
features over 875 million records. First, they used a principal component analysis for
dimension reduction. Then, data clustering was performed. This is followed by demand
forecasting for each cluster using a novel decision integration strategy called boosting
ensemble. They concluded that the combination of a deep neural network with a boost-
ing strategy yielded the best accuracy, minimizing the prediction error for demand
forecasting.
Chen and Lu [98] combined clustering algorithms of SOM, a growing hierarchical self-
organizing mapping (GHSOM), and K-means, with two machine-learning techniques
of SVR and extreme learning machine (ELM) in sales forecasting of computers. The
authors found that the combination of GHSOM and ELM yielded better accuracy and
performance in demand forecasts for their computer retailing case study. Difficulties in
forecasting also occur in cases with high product variety. For these types of products in
an SC, patterns of sales can be extracted for clustered products. Then, for each cluster, a
machine-learning technique, such as SVR, can be employed to further improve the pre-
diction accuracy [104].
Brentan et al. [106] used and analyzed various BDA techniques for demand prediction;
including support vector machines (SVM), and adaptive neural fuzzy inference systems
(ANFIS). They combined the predicted values derived from each machine learning tech-
niques, using a linear regression process to arrive at an average prediction value adopted
as the benchmark forecast. The performance (accuracy) of each technique is then ana-
lyzed with respect to their mean square root error (RMSE) and MAE values obtained
through comparing the target values and the predicted ones.
In summary, Table 3 provides an overview of the recent literature on the application of
Predictive BDA in demand forecasting.

Discussions
The data produced in SCs contain a great deal of useful knowledge. Analysis of such
massive data can help us to forecast trends of customer behavior, markets, prices, and
so on. This can help organizations better adapt to competitive environments. To forecast
demand in an SC, with the presences of big data, different predictive BDA algorithms
have been used. These algorithms could provide predictive analytics using time-series
approaches, auto-regressive methods, and associative forecasting methods [10]. The
demand forecasts from these BDA methods could be integrated with product design
attributes as well as with online search traffic mapping to incorporate customer and
price information [37, 71].
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 16 of 22

Predictive BDA algorithms


Most of the studies examined, developed and used a certain data-mining algorithm
for their case studies. However, there are very few comparative studies available in the
literature to provide a benchmark for understanding of the advantages and disadvan-
tages of these methodologies. Additionally, as depicted by Table 3, there is no clear
trend between the choice of the BDA algorithm/method and the application domain
or category.

Predictive BDA applicability


Most data-driven models used in the literature consider historical data. Such a back-
ward-looking forecasting ignores the new trends and highs and lows in different eco-
nomic environments. Also, organizational factors, such as reputation and marketing
strategies, as well as internal risks (related to availability of SCM resources), could
greatly influence the demand [107] and thus contribute to inaccuracy of BDA-based
demand predictions using historical data. Incorporating existing driving factors out-
side the historical data, such as economic instability, inflation, and purchasing power,
could help adjust the predictions with respect to unseen future scenarios of demand.
Combining predictive algorithms with optimization or simulation can equip the mod-
els with prescriptive capabilities in response to future scenarios and expectations.

Predictive BDA in closed‑loop supply chains (CLSC)


The combination of forward and reverse flow of material in a SC is referred to as a
closed-loop supply chain (CLSC). A CLSC is a more complex system than a tradi-
tional SC because it consists of the forward and reverse SC simultaneously [108]. Eco-
nomic impact, environmental impact, and social responsibility are three significant
factors in designing a CLSC network with inclusion of product recycling, remanu-
facturing, and refurbishment functions. The complexity of a CLSC, compared to a
common SC, results from the coordination between backward and forward flows. For
example, transportation cost, holding cost, and forecasting demand are challenging
issues because of uncertainties in the information flows from the forward chain to the
reverse one. In addition, the uncertainties about the rate of returned products and
efficiencies of recycling, remanufacturing, and refurbishment functions are some of
the main barriers in establishing predictions for the reverse flow [5, 6, 109]. As such,
one key finding from this literature survey is that CLSCs particularly deal with the
lack of quality data for remanufacturing. Remanufacturing refers to the disassembly
of products, cleaning, inspection, storage, reconditioning, replacement, and reassem-
bling. As a result of deficiencies in data, optimal scheduling of remanufacturing func-
tions is cumbersome due to uncertainties in the quality and quantity of used products
as well as timing of returns and delivery delays.
IoT-based approaches can overcome the difficulties of collecting data in a CLSC. In
an IoT environment, objects are monitored and controlled remotely across existing
network infrastructures. This enables more direct integration between the physical
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 17 of 22

world and computer-based systems. The results include improved efficiency, accu-
racy, and economic benefit across SCs [50, 54, 110].
Radio frequency identification (RFID) is another technology that has become very
popular in SCs. RFID can be used for automation of processes in an SC, and it is useful
for coordination of forecasts in CLSCs with dispersed points of return and varied quan-
tities and qualities of returned used products [10, 111–114].

Conclusions
The growing need to customer behavior analysis and demand forecasting is deriven by
globalization and increasing market competitions as well as the surge in supply chain
digitization practices. In this study, we performed a thorough review for applications of
predictive big data analytics (BDA) in SC demand forecasting. The survey overviewed
the BDA methods applied to supply chain demand forecasting and provided a compar-
ative categorization of them. We collected and analyzed these studies with respect to
methods and techniques used in demand prediction. Seven mainstream techniques were
identified and studied with their pros and cons. The neural networks and regression
analysis are observed as the two mostly employed techniques, among others. The review
also pointed to the fact that optimization models or simulation can be used to improve
the accuracy of forecasting through formulating and optimizing a cost function for the
fitting of the predictions to data.
One key finding from reviewing the existing literature was that there is a very limited
research conducted on the applications of BDA in CLSC and reverse logistics. There are
key benefits in adopting a data-driven approach for design and management of CLSCs.
Due to increasing environmental awareness and incentives from the government, nowa-
days a vast quantity of returned (used) products are collected, which are of various types
and conditions, received and sorted in many collection points. These uncertainties have
a direct impact on the cost-efficiency of remanufacturing processes, the final price of
the refurbished products and the demand for these products [115]. As such, design and
operation of CLSCs present a case for big data analytics from both supply and demand
forecasting perspectives.

Abbreviations
ANFIS: Adaptive neural fuzzy inference systems; ARIMA: Auto regressive integrated moving average; ANN: Artificial neural
network; BDA: Big data analytics; BP: Backpropagation; CLSC: Closed-loop supply chain; ELM: Extreme learning machine;
ERP: Enterprise resource planning; GA: Genetic algorithms; GHSOM: Growing hierarchical self-organizing map; HW:
Holt-winters; IoT: Internet of things; KNN: K-nearest-neighbor; MAD: Mean absolute deviation; MAE: Mean absolute error;
MAPE: Mean absolute percentage error; MSE: Mean square error; RMSE: Mean square root error; RBF: Radial basis func-
tion; PSO: Particle swarm optimization; SOMs: Self-organizing maps; SKU: Stock-keeping unit; SCA: Supply chain analytics;
SC: Supply chain; SCM: Supply chain management; SVM: Support vector machine; SVR: Support vector regression; TSF:
Time-series forecasting; TCD: Total cost deviation; U-Theil: Theil inequality index.

Acknowledgements
The authors are very much thankful to anonymous reviewers whose comments and suggestion were very helpful in
improving the quality of the manuscript.

Authors’ contributions
The authors contributed equally to the writing of the paper. First author conducted the literature search. Both authors
read and approved the final manuscript.

Funding
None.

Availability of data and materials


The paper presents a review of the literature extracted from main scientific databases without presenting data.
Seyedan and Mafakheri J Big Data (2020) 7:53 Page 18 of 22

Ethics approval
Not applicable.

Competing interests
The authors declare no competing or conflicting interests.

Received: 5 April 2020 Accepted: 17 July 2020

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