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Very often questions arise how to convince upper management that the forecasting function is absolutely necessary. By calculating how much you will save for each percentage error reduced, this template will help you justify the support for the forecasting function to management. Although every benefit of reduction in forecast error cannot be quantified, many of them derived in the area of the supply chain can be measured. The savings alone from this area are big enough to gain support for this function.
Since error can result from under- and over-forecasting, the template has been divided into two: (1) Benefits of Reducing Error From Over-Forecasting and (2) Benefits of Reducing Error From Under-Forecasting. When your forecast is less than the actual, you make an error of under-forecasting. By the same token, if your forecast is greater than the actual, you make an error of over-forecasting. By reducing forecast error in each case, you will see improvements in your profits.
Plug-in your own numbers, and then see for yourself!
When your forecast is less than the actual, you make an error of under-forecasting. Please plug in your numbers below to calculate the benefits. Description of each field is listed below as well.