Question

A company that produces highly sensitive medical products with critical use applications, wants to insure that any bias or error in their demand forecast is strongly emphasized in future forecasts. Which of these ERROR method arnalysis would best meet their requirements?

a. MAZE
b. MAD
c. BIAS
d. MSE
e. Either A or B would be effective

Answer 1

To emphasize bias or error in demand forecasting for sensitive medical products, a company should use the MSE method because it accentuates larger errors, which are more critical for such products.

Step-by-step explanation:

A company that produces highly sensitive medical products and seeks to emphasize any bias or error in their demand forecast should use the Mean Squared Error (MSE) method. The MSE is useful as it squares the errors before averaging, which emphasizes larger errors more significantly than smaller ones. Large errors can be more problematic in the context of sensitive medical products, as they could lead to significant issues in supply chain management. On the other hand, the Mean Absolute Deviation (MAD) provides a straightforward measure of forecast error without emphasizing the magnitude of errors. Bias, as an ERROR method analysis tool, refers to the systematic deviation from the target in one direction and could also highlight consistent overestimation or underestimation in forecasts.