Answers To Your Forecasting Questions

answers to your forecasting questions q. How should I handle the calculation of WMAPE or MAPE when an item forecast is greater than zero but actual is zero; or when actual is greater than zero but forecast is zero. —Anonymous a. You cannot leave zero, either for forecast or for actual, in the calculation of MAPE or WMAPE. Otherwise, you would distort the results. The best way to handle this is as follows: 1. If the data have an intermittent demand, it is best to compute MAPE/WMAPE with quarterly or biannual data, depending on the nature of the data. In other words, if the zero appears in one month or two months in a row, compute quarterly MAPE/WMAPE. If it appears three, four, or five months in a row, compute biannual MAPE/WMAPE. 2. For other products, we have two options for calculating MAPE/WMAPE: a) Combine this item with another in the same category, and then compute the MAPE/ WMAPE. b) Compute MAPE/WMAPE using the quarterly instead of monthly data. Also, if a product’s forecast or actual has a zero value, it is not a big revenue generator item, and thus is not that important. By handling the calculation the way I suggested above would provide enough control on the item. ...