“The sales team forecasts $100 million in revenue for the quarter.”
Many companies motivate employees with incentives for matching sales results to predictions. Some punish them for being wrong. Some do both. A constant lament: “Why, oh why, can’t I get an accurate sales forecast?” .
“Businesses often use forecasts to project what they are going to sell. This allows them to prepare themselves for the future sales in terms of raw material, labor, and other requirements they might have. When done right, this allows a business to keep the customer happy while keeping the costs in check,” according to Arkieva, a company that specializes in supply chain management. Seems reasonable.
Insisting on forecast accuracy is the easy part. It’s when people try to measure accuracy that things get weird.
One popular metric is MAPE, or Mean Absolute Percentage Error. According to the table below, APE, or Absolute Percentage Error looks relatively tight at Read more