Measuring Forecast Accuracy

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Measuring Forecast Accuracy

• Prepared by
• Jennifer Preston

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Agenda
1. Basic Concept
2. Quantity Accuracy
3. Time Accuracy
4. All in One
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Agenda Basic Concept
1. Basic Concept
2. Quantity Accuracy
3. Time Accuracy
4. All in One
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Basic Concept

• Forecast Error
• Where
• Ai the actual value in time period i
• Fi the forecast value in time period i

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Dimensions of Forecast Accuracy
FORECAST ACCURACY
Quantity Accuracy
Time Accuracy
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Agenda Quantity Accuracy
1. Basic Concept
2. Quantity Accuracy
3. Time Accuracy
4. All in One
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Quantity Accuracy Common Measurements

• Mean Error
• Where
• FE Forecast Error
• Ai The actual value in time period i
• Fi The forecast value in time period i
• Mean Square Error
• Where
• MSE Mean Square Error
• Ai The actual value in time period i
• Fi The forecast value in time period i

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Quantity Accuracy Common Measurements

• Mean Absolute Deviation
• Where
• MAD Mean Absolute Deviation
• Ai The actual value in time period i
• Fi The forecast value in time period i
• Mean Absolute Percentage Error
• Where
• MAPE Mean Square Error
• Ai The actual value in time period i
• Fi The forecast value in time period i

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Quantity Accuracy Calculation (Under and Over
Forecast)

• Quantity Accuracy
• Where
• N Set of forecast quantity related to an
  actual quantity n 1, 2, 3 ....... N.
• Fn_i Forecast quantity number n related to an
  actual quantity in period i
• Ai Corresponding actual quantity in period i
• c Weight factor related to over- and
  under-forecast, c gt 1

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Quantity Accuracy Calculation(Weight of Under
and Over Forecast)

• If costs related to underforecast costs related
  to overforecast,
• then C2
• If costs related to underforecast lt costs related
  to overforecast, then 1ltClt2

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Agenda Time Accuracy
1. Basic Concept
2. Quantity Accuracy
3. Time Accuracy
4. All in One
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Time Accuracy (Different Time Shifting)

• Prepone

Postpone
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Time Accuracy Calculation(Post and Pre-poned
Forecast)

• Time Accuracy
• Where
• DT difference between the forecast time and the
  actual time
• TD time span for assigning greater-than-zero
  accuracy for a time shift

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Agenda All in One
1. Basic Concept
2. Quantity Accuracy
3. Time Accuracy
4. All in One
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Total Forecast Accuracy

• Combining Quantity and Time Accuracy

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Thank You