What is forecast accuracy in supply chain management?

Forecast accuracy in supply chain management refers to the extent to which actual demand aligns with forecasted demand. It is a critical measure because it directly impacts inventory management, production planning, and overall supply chain efficiency. High forecast accuracy means that a business can better meet customer demand without overstocking or understocking inventory. This alignment helps companies minimize costs associated with excess inventory and stockouts, leading to improved customer satisfaction and reduced waste.

The other options focus on different aspects of supply chain performance. For example, measuring inventory turnover assesses how quickly inventory is sold and replaced over a period, which is relevant but not a direct measure of forecast accuracy. The ratio of supply to demand provides insight into the balance but does not specifically reflect how well forecasts predict actual sales. Effectiveness of inventory reduction strategies relates to managing inventory levels but does not address the forecast's correlation with actual demand.