Demand Forecasting Best Practices

10 What is a good forecast error?

When teaching students or training professionals on forecasting KPIs, I like to repeat over and over the same question: “How do you know if a forecast is good enough?” Take a minute to think about this question (you can directly refer to your own demand planning process).

Usually, students and professionals reply along these lines:

• “We compare this year’s accuracy against what we achieved last year.”

  But what if last year was especially good or bad? For example, the accuracy you achieved forecasting March 2021 is likely much better than the one achieved in March 2020, which was probably dramatically low due ...