Backorder Prediction in Inventory Management: Classification Techniques and Cost Considerations

This article introduces an advanced analytical approach for predicting backorders in inventory management. Backorder refers to an order that cannot be immediately fulfilled due to stock depletion. Multiple classification techniques, including Balanced Bagging Classifiers, Fuzzy Logic, Variational Autoencoder - Generative Adversarial Networks, and Multi-layer Perceptron classifiers, are assessed in this work using performance evaluation metrics such as ROC-AUC and PR-AUC. Moreover, this work incorporates a profit function and misclassification costs, considering the financial implications and costs associated with inventory management and backorder handling. The results demonstrate the effectiveness of the predictive model in enhancing inventory system service levels, which leads to customer satisfaction and overall organizational performance. Considering interpretability is a significant aspect of using AI in commercial applications, permutation importance is applied to the selected model to determine the importance of features. This research contributes to the advancement of predictive analytics and offers valuable insights for future investigations in backorder forecasting and inventory control optimization for decision-making.