Chapter 4 Part 6

# Chapter 4 Part 6 - Agenda Assignment Times Series...

This preview shows pages 1–4. Sign up to view the full content.

1 1 Agenda • Assignment • Times Series Forecasting Models (Chapter 4) 2 Demand Forecasting Chapter 4 (Part 6)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 3 The ultimate goal of any forecasting endeavor is to have an accurate and unbiased forecast. The cost associated with prediction error can be substantial and include the cost of lost sales, safety stock, unsatisfied customers, and loss of goodwill. According to a recent survey, only 18% of the surveyed companies had forecast accuracy exceeding 90%. Forecasting Accuracy 4 Forecast Error Forecast error , which is the difference between actual demand and the forecast, is used to evaluate the accuracy of a forecasting model. Error (E t ) = Actual t Forecast t = A t F t For all measures of forecast accuracy, the closer the measure is to zero , the better the forecast.
3 5 Absolute measures of forecast accuracy These measures are expressed in the same unit of measurement as the data. Relative measures of forecast accuracy These measures provide a perspective of the magnitude of the forecast error relative to actual demand. For example, an absolute forecast error of 10 is better when the actual demand is 1000 than when the actual demand is 100. Measures of Forecast Accuracy 6 Common absolute measures to evaluate forecast accuracy are: Running Sum of Forecast Error (RSFE) Mean Forecast Error (MFE) Mean Absolute Deviation (MAD) Mean Squared Error (MSE) Absolute Measures of Forecast Accuracy

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/11/2011 for the course WCOB 2023 taught by Professor Billthompson during the Spring '07 term at Arkansas.

### Page1 / 9

Chapter 4 Part 6 - Agenda Assignment Times Series...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online