Managerial evaluation of sales forecasting effectiveness: A MIMIC modeling approach

Abstract

A Multiple Indicators and MultIple Causes (MIMIC) model is developed in which managerial evaluations of forecasting effectiveness are modeled as a function of different forecast performance criteria, namely, accuracy, bias, timeliness and cost. The model is estimated using data from a survey of export sales forecasting practices and several hypotheses linking the aforementioned criteria on effectiveness are tested. The findings indicate that evaluations of forecasting effectiveness are equally influenced by short-term accuracy and absence of overestimating bias, while timely delivery of the forecast to management is somewhat less important. Long-term accuracy, underestimation and timing of production of the forecast are not found to impact on effectiveness. Implications of the results for forecasting practice are considered and future research directions identified.