Demand Planning — Mean Absolute Percent Error or MAPE

When discussing forecast accuracy in the supply chain, we typically have one measure in mind: the Mean Absolute Percent Error or MAPE. However, there is a lot of confusion between Academic Statisticians and corporate Supply Chain Planners in interpreting this metric. Most academics define MAPE as an average of percentage errors over a number of products. Whether it is erroneous is subject to debate. However, this interpretation of MAPE is useless from a manufacturing supply chain perspective. The following discusses forecast error and an elegant method to calculate meaningful MAPE.

Demand Planning Net specializes in helping businesses improve their planning across their Value Chain. We provide consulting services and solutions implementation for Demand Planning, Sales Forecasting, Integrated Business Planning (IBP), Sales and Operations Planning (S&OP), and Supply Chain Optimization.

Sales Forecasting is a key business process that enables the Sales teams to plan their promotions, optimize their spend and determine a volume forecast for key sales & business decisions. Sales Volume Forecasts are a key input into Demand Planning and S&OP.

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