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Strengths of forecasting errors

  • Forecasting errors compels an organization to come up with strong systems on the ways of monitoring and the tracking of sales in a period that goes beyond the current one
  • The technique also offers the management a platform that allows it to make adjustments on the strategy of the business. This is influenced by the forecasting of the growth in sales.
  • Forecasting errors enables the management to make informed decisions, for instance, in a situation whereby the company notices that the demand of a particular good is going down, the organization’s management may make a decision to reduce the number of the staff members.

Weaknesses of the Forecasting Errors

-Future expectations are predicted by the use of historical data. In a situation whereby there is insufficient information on what happened in the past, the application of the forecasting errors may be rendered less effective.

-Similarly, the results obtained from the past sales do not necessarily imply a similar result in the future. Thus, the application of forecasting errors may be rendered useless.

  1. Mean Absolute Deviation (MAD)

Strengths of MAD

  • The mean absolute deviation (MAD) gives predictions that are not biased
  • Similarly the method gives accurate results

Weaknesses

  • It is tedious to do the calculations.
  1. Cumulative Sum of Forecast Errors

Strengths

  • It indicates the bias that may be available in a forecast
  • It gives the management of the organization a platform to make a decision on the best model to follow in a business plan.

Weaknesses-strengths of forecasting errors

  • It is tedious to do the calculations

Mean Bias

Strengths

  • It can easily be used to indicate the biased and the unbiased decisions. For instance, an estimator whose biasness is equivalent to zero is said to be unbiased.

Weaknesses

  • The interpretation should be done carefully because the positive and the negative errors cancel out

 

The most useful technique to be used is the use of forecasting errors because it gives the management several options regarding the decisions that it takes. For instance, if the error is too huge, the managers of an organization can be forced to change its strategy to conform to negate the potential risks.Strengths of forecasting errors