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I am working on a demand forecasting project and I am puzzled by the client's standards of forecast evaluation. The MAPE (Mean Absolute Percentage Error) with the sample data Forecast = 300 and Demand = 100 is 
$$
    \text{MAPE} =\frac{|300-100|}{100} =2
$$

However the client focuses on forecasting accuracy. It is defined as 
$$
     \text{Accuracy}=\max(0,1-\text{MAPE})
$$

This means that a MAPE of 1, 3 or 3000 gives the same forecasting accuracy of 0. To me this does not make sense, because it is equivalent to restricting MAPE to $\text{MAPE}_r = \max(1,\text{MAPE})$. 

However, it seems to be in line with the measurement of forecasts in the demand planning ecosystem [http://demandplanning.net/MAPE.htm][1]. Can someone please explain to me why this could be useful? 


  [1]: http://demandplanning.net/MAPE.htm 

EDIT: I understand that someone can define anything. My only question is whether the definition makes sense for the demand planning / management purpose. 

Referring to the text in the link, restricting any error metric does not make sense to me especially(!) in demand planning. If the true demand is 1 unit but I forecasted 300, then 300 times more raw materials or human resources were planned for this product in this period. This overestimation must cause  substantially higher cost than a forecast of 2 units, although both forecasts would result in a forecasting accuracy of 0. This is implied by MAPE but not by accuracy. 

So why should forecasting accuracy defined as above be relevant at all? Why do I need it when MAPE is there already? What value does it add? To me it seems to introduce bias - if anything at all.

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$\begingroup$ You had specified MAPE as mean average percentage error. The standard way of defining MAPE is mean absolute percentage error. I guess it was just a mistake, so I corrected it. $\endgroup$

Richard Hardy
– Richard Hardy

2016-11-28 09:42:33 +00:00
Commented Nov 28, 2016 at 9:42
$\begingroup$ Answer to your second question is simple: you do not need it, it does not give you any additional information over MAPE, it is simply your client that prefers it for some reason. If you want to know why he prefers it, ask him... $\endgroup$

Tim
– Tim

2016-11-28 10:29:40 +00:00
Commented Nov 28, 2016 at 10:29
$\begingroup$ lol thanks, but the client does not know the answer. He was told to evaluate the whole supply chain demand with this metric but cannot explain why. $\endgroup$

HOSS_JFL
– HOSS_JFL

2016-11-28 10:33:33 +00:00
Commented Nov 28, 2016 at 10:33

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