Question

Part 2. The table below provides the actual demand and a forecast for the last 12 months of Atwater's Problem Creation Company. Calculate the Cumulative Forecast Error and the Tracking Signal values for the last 12 months. Is the forecast Biased? Does it need to be replaced?
		Actual	New	Forecast		Abs.	Cumulative Abs
	Month	Demand	Forecast	Error	CFE	Error	Error	MAD	T.S.
1	January	2000	1980
2	February	2400	2340
3	March	2300	2350
4	April	1800	1780
5	May	3300	3240
6	June	4425	4560
7	July	1900	1890
8	August	2000	2100
9	September	2200	1900
10	October	2200	1730
11	November	3325	3280
12	December	1700	1870

Answer 1

Let

At = Actual Demand

Ft = New Forecast

then

1. Forecast Error = At - Ft

2. The CFE (cumulative Forecast Error) values are obtained by adding the current Forecast error and the previous month's Forecast error values.

3. Absolute Error = |At - Ft|

4. The cumulative absolute error values are obtained by adding the current month's absolute error and the previous month's Forecast error values.

5. The MAD (Mean Absolute Deviation) value is obtained by taking the average of Absolute error values.

6. The Tracking Signal value is obtained by dividing the cumulative error by the MAD value.

From the table,

.	.	Actual	New	Forecast		Abs.	Cumulative Abs	.	.
	Month	Demand	Forecast	Error	CFE	Error	Error	MAD	T.S.
1	January	2000	1980	20	20	20	20	.	.
2	February	2400	2340	60	80	60	80	.	.
3	March	2300	2350	-50	30	50	130	.	.
4	April	1800	1780	20	50	20	150	.	.
5	May	3300	3240	60	110	60	210	.	.
6	June	4425	4560	-135	-25	135	345	.	.
7	July	1900	1890	10	-15	10	355	.	.
8	August	2000	2100	-100	-115	100	455	.	.
9	September	2200	1900	300	185	300	755	.	.
10	October	2200	1730	470	655	470	1225	.	.
11	November	3325	3280	45	700	45	1270	.	.
12	December	1700	1870	-170	530	170	1440	.	.
Sum	.	.	.	.	.	1440	.	.	.

The tracking signal is positive which means the demand is greater than forecast.

Since the TS > 3.75, there is a forecast bias hence the forecast method needs to be replaced.