What is Forecast bias?

Forecast bias matters because it tells you whether your ordering habits are consistently off in one direction, not just occasionally wrong. A store owner who always forecasts high ties up cash in excess stock. One who always forecasts low keeps running into stockouts and lost sales.

Check for bias every few months by comparing your forecasts to what actually sold. If you see a steady pattern, adjust your forecasting method or inputs rather than just tweaking one order at a time.

Formula

Example

A candle store forecasts 100 units a month for a scented jar candle. Actual sales come in at 80, 85, 90 and 82 over four months. Every month the forecast overshoots, so the store has a positive bias of roughly 15 to 20 units a month, not just random noise.

Common mistakes

• Judging bias from one period instead of a consistent trend across several.
• Confusing bias with simple forecast error, which does not capture direction.
• Ignoring bias after a product's demand pattern changes, such as after a seasonal shift.

Forecast bias and SteadyShelf

SteadyShelf's forecasts update as new sales data comes in, which helps correct a biased forecast before it drives an order-by date or reorder quantity that is too high or too low.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Demand forecasting · Moving average forecast · Forecast accuracy · MAPE · Demand variability

Full inventory glossary

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