Issue: 2017/Vol.27/No.1, Pages 5-19
FORECAST VALUE ADDED (FVA) ANALYSIS AS A MEANS TO IMPROVE THE EFFICIENCY OF A FORECASTING PROCESS
Filip Chybalski
Cite as: F. Chybalski. Forecast value added (FVA) analysis as a means to improve the efficiency of a forecasting process. Operations Research and Decisions 2017: 27(1), 5-19. DOI 10.5277/ord170101
Abstract
A praxeological approach has been proposed in order to improve a forecasting process through the employment of the forecast value added (FVA) analysis. This may be interpreted as a manifestation of lean management in forecasting. The author discusses the concepts of the effectiveness and efficiency of forecasting. The former, defined in the praxeology as the degree to which goals are achieved, refers to the accuracy of forecasts. The latter reflects the relation between the benefits accruing from the results of forecasting and the costs incurred in this process. Since measuring the benefits accruing from a forecasting is very difficult, a simplification according to which this benefit is a function of the forecast accuracy is proposed. This enables evaluating the efficiency of the forecasting process. Since improving this process may consist of either reducing forecast error or decreasing costs, FVA analysis, which expresses the concept of lean management, may be applied to reduce the waste accompanying forecasting.
Keywords: forecasting, praxeology, efficiency, forecasting added value, FVA
Received: 11 October 2016 Accepted: 7 March 2017