What is Forecast Error in Retail? Explained

Forecast error in retail is the discrepancy between predicted and actual sales or demand. It measures the accuracy of forecasting models and is a critical metric for evaluating the effectiveness of supply chain management. Retailers use various forecasting methods to anticipate consumer demand and optimize inventory levels. The forecast error, calculated by comparing predicted quantities with actual sales or demand, provides insights into the precision of these predictions. Minimizing forecast errors is essential for retailers to enhance operational efficiency, reduce excess inventory, and meet customer demand more effectively.