Certified Supply Chain Professional (CSCP) Practice Exam

Can the tracking signal be both negative and positive?

1. Yes, it shows the direction of bias

2. No, it can only be one or the other

3. It only indicates under-forecasting

4. It only indicates over-forecasting

The correct answer is: Yes, it shows the direction of bias

The tracking signal is an essential tool in supply chain management that helps monitor the accuracy of forecasts. It is calculated by comparing the cumulative sum of forecast errors to a predetermined control limit. The ability of the tracking signal to take on both negative and positive values is significant because it indicates the direction and magnitude of bias in forecasting. When the tracking signal is positive, it suggests that the actual demand has exceeded the forecasted demand, indicating a tendency towards under-forecasting. Conversely, a negative tracking signal indicates that actual demand has fallen short of forecasts, which points to potential over-forecasting. This dual capability of the tracking signal allows organizations to gauge whether their forecasting methods need adjustments, depending on whether they are consistently underestimating or overestimating demand. The effectiveness of the tracking signal in providing actionable insights into the forecasting process makes it a valuable component in maintaining supply chain efficiency.