Certified Supply Chain Professional (CSCP) Practice Exam

What is the primary purpose of the tracking signal in forecasting?

1. To measure inventory levels

2. To assess the accuracy of forecasts

3. To analyze market trends

4. To determine production schedules

The correct answer is: To assess the accuracy of forecasts

The primary purpose of the tracking signal in forecasting is to assess the accuracy of forecasts. The tracking signal is a statistical tool used to evaluate how well a forecasting model is performing over time. It helps identify whether the forecasted values are consistent with the actual outcomes. A tracking signal is typically calculated as the ratio of the cumulative forecast error to the mean absolute deviation (MAD). By monitoring this ratio, supply chain professionals can determine whether their forecasts are consistently overestimating or underestimating actual demand. If the tracking signal falls outside of a predefined range (often set between -4 and +4), it indicates that the forecasting method may need to be revised or that there are significant changes in the underlying data that should be investigated. This ongoing assessment allows businesses to improve forecasting accuracy, thus reducing costs associated with overstocking or stockouts and enhancing overall supply chain efficiency.