Sales Forecasting Errors and Inventory Fluctutions: Random Errors and Random Sales

descriptionPublicationkeyboard_double_arrow_right Article 01 Jan 1966 English Publisher:Institute for Operations Research and the Management Sciences (INFORMS)Journal:Management Science, volume 12, pages 448-456 (issn: 0025-1909, eissn: 1526-5501,

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Authors: Howard E. Thompson;

doi: 10.1287/mnsc.12.5.448

Sales Forecasting Errors and Inventory Fluctutions: Random Errors and Random Sales

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Abstract

The purpose of this paper is to study the effects of errors in the sales forecast on inventory changes and production rates. This is done by computing the ratio of the standard deviation of inventory change or production rate to the standard deviation of sales rate. By use of this ratio the effects of the average forecast error, the variance of the forecast error, and the serial correlation of sales can be studied. Both analytical method and simulation procedures are used.

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