Demand & Decision Intelligence System: An AI/ML-Based Platform for Demand Forecasting, Anomaly Detection, and Inventory Optimization in Indian Retail

Abstract: Demand forecasting and inventory management help to ensure product availability and minimize inventory costs in retail or fast-moving consumer goods (FMCG). This paper introduces the Demand & Decision Intelligence System, an artificial intelligence/machine learning-based system, which combines forecasting, inventory control, anomaly detection, price elasticity, and natural language business inquiry in one web application.

The algorithm uses open-source Indian grocery data from April 1 to July 10, 2022, comprising of about 46.7 million transactions. It evaluates eight candidate algorithms, including Naive, Seasonal Naive, Moving Average, Prophet, Ridge Regression, HistGradientBoosting, Croston’s Method, and Syntetos-Boylan Approximation (SBA). On the chronological holdout test set between July 1-10, 2022, the HistGradientBoosting algorithm had a weighted absolute percentage error (WAPE) of 30.08% and a mean absolute error (MAE) of 0.5481. Thus, the evaluated forecasting pipeline requires more testing to generalize the results.

Additionally, the application introduces an inventory decision support engine that automates safety stock, reorder point, and target stock calculations, a rolling Z-score and isolation forest anomaly detection module, log-log regression price elasticity model, and retrieval-augmented generation chatbot for business inquiries. The technical architecture consists of a React.js dashboard, FastAPI backend, and PostgreSQL database. Overall, the paper presents an integrated decision- support system that combines demand forecasting and inventory planning in a single platform. However, it requires additional research to evaluate the effectiveness of inventory suggestions, anomaly detection, price elasticity, and chatbot’s applicability.

Keywords: Demand Forecasting, Inventory Optimization, Machine Learning, Anomaly Detection, Time-Series Analysis, Business Intelligence, RAG Chatbot, Price Elasticity, Indian Retail, FMCG.