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How do I measure the business value of a better forecast?
Translate accuracy into money: fewer stock-outs and lost sales, less excess stock and write-off, lower overtime or idle labour, and better cash use. Compare outcomes before and after, or between groups using the new and old methods, rather than quoting accuracy percentages alone.
A rough approach is to simulate decisions: apply your ordering or staffing rules to past data using the old forecast and the new one, and compare resulting costs.
Be honest about other changes that may influence results. Value depends on whether decisions actually change, so a more accurate forecast nobody uses is worth nothing. Include the running cost of the model, such as cloud fees and maintenance time, when calculating return.
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