The Effect and Cost of Forecast Error Bias for Multiple‐stage Production‐inventory Systems

This paper examines forecast error with an intention not to minimize forecast error so much as to bias the resultant error in order to achieve better managerial results. Much work has been accomplished by other researchers toward the goal of minimizing forecast error—sometimes by the use of sophisticated forecasting techniques. The results of this paper indicate that manipulating forecast error bias may be the better managerial strategy as opposed to going to great lengths to minimize forecast error. Subject Areas: Forecasting, Aggregate Planning, Capacity Planning, and Production/Operations Management .