Key assumptions in calculating the Cost of Forecast Error. A commentary on Peter Catt’s article, assessing the Cost of Forecast Error, in Issue 7 of Foresight

Boylan, John (2007) Key assumptions in calculating the Cost of Forecast Error. A commentary on Peter Catt’s article, assessing the Cost of Forecast Error, in Issue 7 of Foresight. Foresight: The International Journal of Applied Forecasting, 8. pp. 22-24. ISSN 1555-9068

Abstract

John’s key points are these. • Organizations should consider which service level measure aligns most closely to their corporate objectives. Cost of Forecast Error (CFE) calculations should be based on this measure. • Assessment of service level targets at higher levels of aggregation elevates an operational task to a strategic issue and facilitates consideration of external factors. • Alternative approaches which do not depend on Cost of Forecast Error estimates, such as tradeoff curves, should be considered. Copyright International Institute of Forecasters, 2007