The production department suspects forecast inaccuracies leading to excess inventory. Using the following data, calculate the tracking signal to identify if there is any demand bias in the sales forecast. Month Forecast Error MAD January -10 5 February -5 4 March 0 3 April 5 4 May -5 4 June 10 5 July 5 5 August -10 5 September 15 7 October -15 6 November 10 8 December -10 6

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TheoryPractice · Accepted Answer

-1.94. To calculate the tracking signal, sum the forecast errors: (-10) + (-5) + 0 + 5 + (-5) + 10 + 5 + (-10) + 15 + (-15) + 10 + (-10) = -10. Calculate the MAD as the average of the provided MAD values: $$\frac{5+4+3+4+4+5+5+5+7+6+8+6}{12}$$ = 5.17. The tracking signal is $$\frac{-10}{5.17}$$ = -1.94. A negative tracking signal indicates a potential bias towards underestimation.

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