The process of evaluating how well a predictive model aligns with actual demand is essential for effective business operations. This evaluation quantifies the difference between predicted values and real-world results, often expressed as a percentage or ratio. For example, comparing projected sales figures against realized sales revenue reveals the magnitude of the forecast error.
Accurate projections minimize overstocking, stockouts, and associated costs. Businesses leveraging reliable forecasting experience improved resource allocation, enhanced customer satisfaction, and greater profitability. Historically, improvements in statistical methods and computing power have driven progress in achieving more precise estimations of future needs.
