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Assessing forecast model performance in an ERP environment

Peter M. Catt (School of Computing and Information Technology, Unitec New Zealand, Auckland, New Zealand)
Robert H. Barbour (School of Computing and Information Technology, Unitec New Zealand, Auckland, New Zealand)
David J. Robb (Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing, People's Republic of China)

Industrial Management & Data Systems

ISSN: 0263-5577

Article publication date: 23 May 2008

Abstract

Purpose

The paper aims to describe and apply a commercially oriented method of forecast performance measurement (cost of forecast error – CFE) and to compare the results with commonly adopted statistical measures of forecast accuracy in an enterprise resource planning (ERP) environment.

Design/methodology/approach

The study adopts a quantitative methodology to evaluate the nine forecasting models (two moving average and seven exponential smoothing) of SAP®'s ERP system. Event management adjustment and fitted smoothing parameters are also assessed. SAP® is the largest European software enterprise and the third largest in the world, with headquarters in Walldorf, Germany.

Findings

The findings of the study support the adoption of CFE as a more relevant commercial decision‐making measure than commonly applied statistical forecast measures.

Practical implications

The findings of the study provide forecast model selection guidance to SAP®'s 12+ million worldwide users. However, the CFE metric can be adopted in any commercial forecasting situation.

Originality/value

This study is the first published cost assessment of SAP®'s forecasting models.

Keywords

Citation

Catt, P.M., Barbour, R.H. and Robb, D.J. (2008), "Assessing forecast model performance in an ERP environment", Industrial Management & Data Systems, Vol. 108 No. 5, pp. 677-697. https://doi.org/10.1108/02635570810876796

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited