Inventory management systems support firms in planning for an uncertain future by using demand forecasts and optimization models to make restocking decisions. Recent work on the "data-driven" newsvendor found that incorporating machine learning (ML) can improve the success of inventory management by accounting for demand-driving information. However, ML methods are infamously hard to interpret, which may hinder their acceptance. To ameliorate this, we show how to apply an interpretable attention-based architecture, the Temporal Fusion Transformer (TFT), to the data-driven newsvendor problem. Our approach replicates and extends the original TFT time series forecasting method to the inventory management domain. We evaluate our method on two real-world retail datasets, each covering 260 perishable food items, and provide domain-specific benchmarks. The computational study illustrates TFT’s interpretable predictions and their comparatively high accuracy. Our work aims to lay the groundwork for further design science research on transparency in human-AI collaboration in this domain.
Feddersen, Leif and Cleophas, Catherine, "SOLVING THE DATA-DRIVEN NEWSVENDOR WITH ATTENTION TO TIME" (2023). ECIS 2023 Research Papers. 425.