Certified Supply Chain Professional (CSCP) Practice Exam

If the tracking signal remains within the range of -4 to +4, what does this indicate?

1. The forecasting method is working correctly

2. The method is not suitable

3. Forecasting errors are high

4. Data collection methods are flawed

The correct answer is: The forecasting method is working correctly

When the tracking signal remains within the range of -4 to +4, it indicates that the forecasting method is functioning effectively. The tracking signal is a measurement used in forecasting to determine how well the forecast aligns with actual results. It is calculated by comparing the cumulative forecast errors to the mean absolute deviation. When the tracking signal is within the specified range, it suggests that the forecast is reasonably accurate and that there is no consistent pattern of bias in the forecasting errors. A tracking signal within this range implies that the forecasts are not continuously overestimating or underestimating the actual values. This allows managers to confidently use the forecasting method for decision-making, as it reflects stability and reliability in predicting future demand. Other options may touch on potential issues with the forecasting method, but they do not apply when the tracking signal is maintained within the optimal range. In summary, this narrow range is a strong indicator that the forecasting system is performing as intended.