Bias

In forecasting, bias occurs when there is a consistent difference between actual sales and the forecast, which may be of over- or under-forecasting. Companies often measure it with Mean Percentage Error (MPE). If it is positive, bias is downward, meaning company has a tendency to under-forecast. If it is negative, company has a tendency to over-forecast. It often results from the management’s desire to meet previously developed business plans or from a poorly developed reward system. For example, if sales performance is measured by meeting the sales quotas, salespeople will be more inclined to under-forecast.