CHARACTERISTICS OF FORECAST
Companies and supply chain managers should be the following characteristics of forecasts.
1. Forecasts are always wrong and should thus include both the expected value of the forecast and a measure of forecast error. To understand the importance of forecast error, consider two car dealers. One of them expects sales to range between 100 and 1,900 whereas the other expects sales to range between 900 and 1,100. Even though both dealers anticipate average sales of 1,000, the sourcing policies for each dealer should be very different given the difference in forecast accuracy. Thus, the forecast error (or demand uncertainty) must be a key input into most supply chain decisions. An estimation of demand uncertainty is unfortunately often missing from forecast, resulting in estimates that vary widely among different stages of a supply chain that is not forecasting collaboratively.