Does Improved Forecast Accuracy Translate to Business Value?

Johann Robette

Foresight: The International Journal of Applied Forecasting, 2023, issue 68, 12-19

Abstract: In this lead article of our special feature section, Johann Robette offers a novel way to test the common belief that improved forecast accuracy delivers monetary value to the business, which of course is the very motivation for accuracy-improvement efforts. His approach utilizes a value-oriented simulation that mimics a real-world decision-making process and generates data that permit measurement of both forecast accuracy and the monetary costs and revenues from replenishment decisions. He then explores the linkage between accuracy and monetary value using augmented data from the M5 competition. His experiment demonstrates that better accuracy does not guarantee added value and, at worst, it could destroy value. Copyright International Institute of Forecasters, 2023

Date: 2023
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