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Q) What is forecast bias? Do you have a view on what should be considered as “best-in-class” bias?

A) It simply measures the tendency to over-or under-forecast. It is an average of non-absolute values of forecast errors. If it is negative, a company tends to over-forecast; if positive, it tends to under-forecast. In the machine learning context, bias is how a forecast deviates from actuals. In new product forecasting, companies tend to over-forecast. But for mature products, I am not sure. So, I cannot give you best-in-class bias. To me, it is very important to know what your bias is and which way it leans, though very few companies calculate it—just 4.3% according to the latest IBF survey. If we know whether we over-or under-forecast, we can do something about it.

 

I hope this helps.

Happy forecasting!

 

Dr. Chaman L. Jain

Editor-in-Chief,

Journal of Business Forecasting