Abstract: Grey forecasting models have found extensive applications across various domains, but the connection between their theory and practice has not yet been fully revealed. This paper seeks to discuss the modelling mechanism of grey forecasting models from the perspective of dynamic system modelling and illustrate how to establish grey forecasting models to address real-world challenges. Firstly, we outline the grey forecasting models under the traditional and direct frameworks. Then, the problem description and model assumptions of grey forecasting models are discussed by incorporating model characteristics and Prof. Deng's original concepts. The complete process of model establishment as well as the purpose and tasks of each step is elaborated in detail. Ultimately, taking the inventory of perishable products as a case study, this article discusses the utilization of grey forecasting models in inventory management and elucidates the application process using citrus as a specific example. 

Key words: Grey system theory, Grey forecasting model, Modelling mechanism, Dynamic system modelling