The new forecast has four times the squared error, but operations wants it. Which model should ship?
Make your call first. Use the published answer and rubric to examine your reasoning when you are ready.
Case briefRead the inputs, then make your call
Fictional meal-preparation exercise. Daily preparation equals the forecast. Each unmet meal costs an assumed 6 USD in lost contribution and service recovery; each surplus meal costs 1 USD after salvage. No carry-over inventory or capacity constraint is included.
| Day 1 | Actual demand 80; forecast A 75; forecast B 90. |
|---|---|
| Day 2 | Actual demand 120; forecast A 115; forecast B 130. |
| Day 3 | Actual demand 100; forecast A 95; forecast B 110. |
| Day 4 | Actual demand 140; forecast A 135; forecast B 150. |
| Unmet meal cost, USD | 6 |
| Surplus meal cost, USD | 1 |
| Evidence limit | Four illustrative days only; future performance has not been measured. |
Your task. Calculate MAE, MSE and operational error cost for each candidate. Choose the next experiment, state the cost ratio that reverses your preference and consider a separate preparation policy.
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