Certified Supply Chain Professional (CSCP) Practice Exam

A MAD value of 0 indicates what about forecasts?

1. Forecasts significantly overshoot demand

2. Forecast matches actual demand exactly

3. High variation exists in forecasts

4. Forecasting is unreliable

The correct answer is: Forecast matches actual demand exactly

A Mean Absolute Deviation (MAD) value of 0 signifies that there is no discrepancy between the forecasted values and the actual values. This means that the forecast matches the actual demand exactly, leading to a perfect prediction scenario. In practical terms, this is ideal for any supply chain as it indicates that the forecast has achieved an optimal accuracy level, which can significantly enhance decision-making, inventory management, and resource allocation. When MAD is 0, it means that every forecasted value has aligned perfectly with what actually occurred in terms of demand, reflecting the effectiveness of the forecasting method used. It is a clear indicator that the forecasting technique is highly reliable and that the assumptions made during the forecasting process are valid and applicable for the scenarios being analyzed. Achieving a MAD of 0 is the goal for any forecaster, as it demonstrates an exceptional ability to predict future demands accurately.