91Ó°ÊÓ

The mean absolute deviation is defined as the average distance between each data point and therefore the mean. It gives us a plan for the variability in an exceeding data set. Mean’ refers to the average of the observations and deviation implies departure or variation from a present standard.

The MAD calculation of forecast errors is done in the (8) column of the table as shown below:

For month 8, the MADis 23.75

A tracking signal could be a measurement that indicates whether the forecast average is keeping pace with any genuine upward or downward changes in demand. When a forecast is consistently low or high, it's noted as a biased forecast.

A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations divided by the mean absolute deviation. The calculation of the tracking signal is done in the (9) column of the table as shown below:

TS = RSFE/MAD

TS = -3/3.00 = -1.00

Where,

RSFE = the running sum of forecast errors, considering the nature of the error. (For example, negative errors cancel positive errors and vice versa)

MAD = the average of all the forecast errors.

The table is shown below:

The tracking signal for month 8 is 7.16

Based on parts (a) and (b) the tracking signal is too large, So Harlen’s method of forecasting should be considered poor. It is not effectively dealing with an apparent upward trend in demand.