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Intermediate Open Pro

Choosing the Right Forecast Error Metric

You are comparing three forecasting models across 200 different retail SKUs, some high-volume (hundreds of units/day) and some very low-volume, intermittent items (0–2 units/day, frequently exactly 0). Your manager wants "one number" to rank the three models overall.

  1. Why is MAPE a poor choice for this comparison, specifically because of the low-volume SKUs?
  2. Why is raw MAE (averaged across all 200 SKUs) also misleading here?
  3. Propose a metric (or combination) that would give a fair, one-number comparison, and justify it.

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