Assessing forecast model performance in an ERP environment

Purpose – The paper aims to describe and apply a commercially oriented method of forecast performance measurement (cost of forecast error – CFE) and to compare the results with commonly adopted statistical measures of forecast accuracy in an enterprise resource planning (ERP) environment. Design/methodology/approach – The study adopts a quantitative methodology to evaluate the nine forecasting models (two moving average and seven exponential smoothing) of SAP ® 's ERP system. Event management adjustment and fitted smoothing parameters are also assessed. SAP ® is the largest European software enterprise and the third largest in the world, with headquarters in Walldorf, Germany. Findings – The findings of the study support the adoption of CFE as a more relevant commercial decision‐making measure than commonly applied statistical forecast measures. Practical implications – The findings of the study provide forecast model selection guidance to SAP ® 's 12+ million worldwide users. However, the CFE metric can be adopted in any commercial forecasting situation. Originality/value – This study is the first published cost assessment of SAP ® 's forecasting models.