Analysis of Forecasting Errors in Supply Chain

Demand forecasting is one of the important activities in a supply chain which provides all the supply chain planning processes with market information crucial for efficient supply chain management. Its performance is measured by forecasting error, which is defined using the difference between forecast and actual sales. In this paper, we classify the forecasting error types based on the cases the discrepancy takes place through the supply chain. We demonstrate that different products can have different combinations of these forecasting error types. Finally, we indicate shortcomings of common forecasting error measures and conclude the paper with remarks on desirable forecasting error measures.