Which KPI is used to assess the accuracy of demand forecasts?

• A. Forecast accuracy
• B. OTIF
• C. Lead Time
• D. Inventory Turnover

Answer: (A)

Forecast accuracy is the KPI that measures how close your predicted demand is to what actually occurs. It’s key because accurate forecasts lead to better planning for inventory, production, and procurement, helping you avoid stockouts and excess inventory. In practice, teams track forecast accuracy using error metrics like mean absolute deviation or mean absolute percentage error—the smaller the error, the higher the forecast accuracy. This gives a clear signal of how well the forecasting method is performing and where to adjust methods or inputs.

Other metrics—like OTIF (on-time in full deliveries), lead time, and inventory turnover—measure different aspects of the supply chain. OTIF focuses on delivery performance, lead time on the speed of fulfilling orders, and inventory turnover on how quickly inventory is used or sold. While important, they don’t directly assess how close forecasts are to actual demand.