Question

A small car dealership keeps a log of how many cars it sells. During the last 7 months, they sold a total of 140 cars. They also monitor accuracy of their forecasting model by calculating the tracking signal. Following is the data for the last 7 months. They use +5 and -5 as their tracking signal UCL and LCL. How is the model performing?

Month	Tracking Signal
1	-1.0
2	-1.5
3	-2.0
4	-2.0
5	-3.5
6	-5.8
7	-9.5

Answer 1

Answer:

Tracking signal = Running Sales Forecast Error / Mean Absolute Deviation

Tracking signal gives a figure which can be matched with the acceptable limit (UCL & LCL) of bias and thus classify the model to be within control or out of control.

As per the information given the tracking signal of the 7 months is as under:

Month	Tracking Signal
1	-1
2	-1.5
3	-2
4	-2
5	-3.5
6	-5.8
7	-9.5

The figure of the last period (7th month in this case) gives the final value of tracking signal which is -9.5

The acceptable limit (UCL & LCL) of tracking signal is +5 and -5.

Since the model is having the final tracking signal of -9.5 which is outside the acceptable limit of +5 and -5, hence The model is NOT PERFORMING WELL. It is having greater bias or deviation between the forecast and actual demand (Sales)

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