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Determining the invoicing dates for raw material order and finish product dispatch using neural networks under exchange rate volatility

Weerasingha, Janith Piyumal; Bandara, Yapa Mahinda; Edirisinghe, Pasan Manuranga

Authors

Janith Piyumal Weerasingha

Pasan Manuranga Edirisinghe



Abstract

The gains from international supply chains are highly affected by the exchange rate fluctuations in the foreign exchange market. Traditional forecasting methods have not been very useful, and as a result, business firms tend to use hedging or forward contracts to mitigate the exchange rate risk. This research focuses on using machine learning models to forecast the exchange rate for future decision-making in business. This paper uses both time-series data and the categorical data with the LSTM (Long Short-Term Memory) Neural Network Model to tackle both linear and non-linear data on monetary fundamentals and derives the best dates for invoicing in the international transaction using data of a manufacturing firm. Results show that using the predictions of the LSTM model to decide the invoicing dates for international transactions delivers foreign exchange gain with a better success rate than selecting random dates for both import and export.

Journal Article Type Article
Acceptance Date Jun 15, 2021
Online Publication Date Jul 3, 2021
Publication Date 2023
Deposit Date Dec 4, 2021
Journal International Journal of Logistics Research and Applications
Print ISSN 1367-5567
Electronic ISSN 1469-848X
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 26
Issue 2
Pages 211-231
DOI https://doi.org/10.1080/13675567.2021.1945018
Keywords Import and export invoicing dates, exchange rate forecasting, LSTM Neural networks, VAR forecasting, news effects
Public URL http://researchrepository.napier.ac.uk/Output/2824378