ForecastError_MAD_RSFE_example

ForecastError_MAD_RSFE_example - Forecast Errors In using...

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Unformatted text preview: Forecast Errors In using the word error, we are referring to the difference between the forecast vaIUC and what actually occurred. In statistics, these errors are called residuals. As long as the forecast value is within the confidence limits, as we discuss later in “Measurement of Error,” this is not really an error. But common usage refers to the difference as an error. \ Demand for a product is generated through the interaction of a number of factors too complex to describe accurately in a model. Therefore, all forecasts certainly FQREQAST ERRoRs (p. 323) 2 Types — Bias - when mistake is made, eg. wrong variables, or relationships, etc random — cannot be explained W MAD: é \AVFA ’ Use - standard error (6) “ - variances (62) - Mean absolute deviation (MAD) - errors generally normally distributed, thus, 1 MAD = 0.8 SD's Tr kin i nal T - measures whether f/c average is keeping pace with real changes in demand TS = Running sum of fie errors MAD (see Exh. 7.9) 8.1 Computing the Mean Absolute Deviation (MAD), the Running Sum of Forecast Errors (RSFE). ‘E X hi1? l t 13.9 ' and the Tracking Signal (TS) from Forecast and Actual Data (fights—{D A A’F 37"" lA'Fl ilA’Fl *zlA‘Fl _RSFE*~ Month Dome-ad Forecast Actual Deviation RSFE Abs. Dev. Sum of Abs. Dev. MAD* TS — W 1 1,000 950 —50 —50 50 50 50 —1 2 1,000 1,070 +70 +20 70 120 60 .33 3 1,000 1.100 +100 +120 100 220 73.3 1.64 4 1.000 960 —40 +80 40 260 65 1.2 5 1,000 1,090 +90 + 170 ’ 90 350 70 2.4 6 1,000 1,050 +50 #2205 50 499 @ 3.3 *For Month 6. MAD = 400 + 6 =66?) ,, RSFE 220 For Month 6, TS = —— = -— = 3.3 MADs. MAD 66.7 A Plot of the Tracking Actual _ exceeds Signals Calculated In forecast Exhibit 13.9 Tracking signal ‘ Actual is less than forecast ...
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ForecastError_MAD_RSFE_example - Forecast Errors In using...

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