This document discusses different methods for measuring forecast accuracy. It covers quantity accuracy, time accuracy, and a combined measure of total forecast accuracy. For quantity accuracy, common metrics include mean error, mean square error, mean absolute deviation, and mean absolute percentage error. Time accuracy considers how accurate the forecast is in predicting the actual time period and can involve preponing or postponing. The document provides formulas for calculating accuracy while accounting for under-forecasting, over-forecasting, and differences in forecast versus actual time periods.

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. Basic Concept Forecast Error : Where : A i – the actual value in time period i F i – the forecast value in time period i

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. 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 Order=A 100% 0% Forecast Accuracy Forecasted Quantity 2A Overforecast Underforecast A 100% 0% Forecast Accuracy Forecasted Quantity CA Overforecast Underforecast

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  T : 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. Combining Quantity and Time Accuracy : Total Forecast Accuracy

16. Thank You