Answers To Your Forecasting Questions

ANSWERS TO YOUR FORECASTING QUESTIONS Q. I am a Demand Planner, and our Demand Planning Group is about six months old and we are still working out some of the bugs in our systems and processes. We are calculating a MAPE value for each of our SKU, but we are having a difficulty getting a representative MAPE value for parts that have a monthly actual demand of zero. Since the formula requires the actual value to be in the denominator, we are unable to get a value because of the division by zero. By default, we have been using a value of 0.1, but that also has its limitations for giving accurate error values. Do you know of a better way to calculate these types of issues, or do we need to go to a different calculation to determine our monthly forecast error? Rich Mayer Paccar Parts A. I understand your predicament. Under the circumstances, the best you can do is to compute MAPE of that SKU over a three or six month period instead of one month. Looks like that SKU is either not important or have an intermittent demand. Using 0.1 as a denominator won’t help as it will distort its MAPE. Q. I felt compelled to respond to your answer in the Fall issue of Journal of Business Forecasting ...