The Forecast Illusion: Why Accuracy Isn’t the Only Metric That Matters

For years, forecast accuracy has been the crown jewel of S&OP and IBP discussions. It is the first chart on the deck, the headline KPI, the number everyone watches. When it is high, we celebrate. When it is low, we analyze.

But here is the uncomfortable truth: forecast accuracy can look good on paper and still deliver poor business outcomes.

Accuracy is only part of the story

Consider this example: A company reports 92% forecast accuracy across its portfolio. At first glance, this looks like success. Yet dig deeper and you find that its fastest growing sports drink line was consistently below forecast. Shelves went empty just as demand was peaking, while slower moving SKUs were over forecast, filling warehouses and driving upholding costs.

The accuracy number looked impressive. The business outcome was nothing but.

Bias is the hidden culprit

What matters more than accuracy in isolation is bias, whether forecasts are consistently skewed high or low.

Under forecasting: Products run out, service levels drop, revenue opportunities are lost.

Over forecasting: Inventory piles up, write offs increase, working capital is tied down.

Bias is what creates recurring pain for business. Tracking and correcting it often tells you more than the headline accuracy percentage.

Decision impact is the real metric

The real value of a forecast is not in its statistical accuracy. It is in its ability to make better decisions. A good forecast is one that:

• Prevents a stockout at the right time

• Reduces excess and obsolescence

• Gives sales and supply teams confidence to act early

  
  

In other words, the impact of forecast quality on business outcomes matters more than the accuracy number itself.

Shifting the conversation

Forward-looking organizations are starting to change the way they review forecasting performance. Instead of leading S&OP meetings with “forecast accuracy,” they now focus on:

Bias: Are we consistently skewed one way?

Exposure: What is the financial and service risk if our forecast is wrong?

Decision impact: Which business outcomes improved because of better forecasting?

This does not mean accuracy is irrelevant. But it does mean that accuracy, by itself, is a vanity metric if it is not tied to decision quality and tangible business results.

Final thought

Forecast accuracy will always be part of the conversation. But if it remains the only metric, businesses risk falling into the illusion of forecast, where good numbers often mask poor outcomes. The real goal of forecasting is not to win at statistics. It is to enable smarter, faster, and more profitable decisions.

📩 Need to energize your S&OP process?

Talk to us at IBP2 — we help organizations move beyond forecast accuracy and design Integrated Business Planning processes that balance accuracy, bias, and decision impact, so planning translates into real business value.