2016
EMSS 2016 Proceeding
Service level definition from forecast error cost evaluation
Authors: A. Sosa, A. Wellens
Abstract
Although forecast errors can imply important losses, frequently its financial impact in business is neglected; some researchers have studied this issue but it is not being used as a common tool for evaluation of the forecasting process. The present paper describes the assessment of the forecast error cost in order to define the most appropriate service level for an inventory control system, considering a product classification that is able to focus on those articles that need more management attention. A key point is the cost function, which allows to quantify the over forecasting cost represented by excess inventory and the under forecasting cost represented by lost sales.
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