Forecast Error Benchmarking

Our Newsletter readers and forum participants ask very frequently:

· Which metrics should I use to measure my forecast performance – WMAPE, MAPE, Bias or something else?

· Is there any benchmark available for forecast error, particularly within my industry?

With this in mind, this past Spring we started conducting the survey across the supply chain and demand planning professionals from various industries. This survey was meant to compile information about their pain points, forecast error metrics they use, the industry they work for, and who owns the demand planning function. We are publishing the first installment of the results from this survey in this newsletter.

As expected one of the metrics used by 52% of the respondents is WMAPE or volume-weighted MAPE, calculated as the Sum of Absolute errors divided by the sum of actual demand.

We have good informative data for Chemical, Consumer Goods (CPG) industries with good sample size and participation from a broad range of companies.  CPG in our study included Food and Beverages as well.  For CPG industries average the forecast, the error is 39%.

One of the common pain points for CPG folks is a number of variables such as price fluctuations, promotion timings, and new items. For the Chemicals industry, the average of forecast error is 36%.  Promotions are not formally planned or executed in Chemicals as in CPG, however, there may be price incentives etc.

there may be price incentives etc.

Please share your views and pain points as comments on this blog or on our linked-in forum.

We welcome you to participate on this survey.  If you fill out the survey you will get PDF copy of Dr. Mark Chockalingam’s presentation on “Is S&OP for you?” that will be presented in the Fall.

Here is the link to survey – https://docs.google.com/spreadsheet/viewform?formkey=dHg0ZVZWel9PZXctWnVWV3ZlS0xwcmc6MQ#gid=0

Welcome to Fall!

Please visit http://demandplanning.net/consulting.htm to know about our services offerings at DPLLC.

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