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Measuring Forecast Accuracy

Measuring Forecast Accuracy

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Measuring Forecast Accuracy

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  1. Measuring Forecast Accuracy Prepared by : Jennifer Preston

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

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

  4. Forecast Error : Where : Ai – the actual value in time period i Fi – the forecast value in time period i Basic Concept

  5. Dimensions of Forecast Accuracy FORECAST ACCURACY Quantity Accuracy Time Accuracy

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

  7. 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

  8. 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

  9. 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 > 1

  10. Forecast Accuracy Forecast Accuracy 100% 100% Overforecast Overforecast 0% 0% Forecasted Quantity 2A Forecasted Quantity A CA Order=A Underforecast Underforecast Quantity Accuracy Calculation(Weight of Under and Over Forecast) • If costs related to underforecast = costs related to overforecast, then C=2 • If costs related to underforecast < costs related to overforecast, then 1<C<2

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

  12. Time Accuracy (Different Time Shifting) Prepone Postpone

  13. 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

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

  15. Total Forecast Accuracy Combining Quantity and Time Accuracy :

  16. Thank You