Evaluating SKU-Level Forecasts With WMAPE, Total Bias, and Active Seller Bias
Every retailer, from a single-store boutique to a global brand, runs on a forecast, and a forecast is only as good as the metric used to judge it. When that metric looks healthy while units go to the wrong places, the losses are real and large. IHL Group estimates that inventory distortion (out-of-stocks plus overstocks) cost retailers worldwide about $1.77 trillion in 2023: roughly $1.2 trillion in lost sales from empty shelves and $562 billion in overstocks, equal to about 7.2% of retail sales [1][2].
The biggest names aren't immune. In 2000, a new demand-planning system at Nike ordered thousands too many of one sneaker and thousands too few Air Jordans. The glitch cost more than $100 million in lost sales and knocked the stock down 20%, prompting CEO Phil Knight's famous line: "This is what you get for $400 million, huh?"[3]. In 2022, Target's first-quarter profit fell about...
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