Abstract
The impact of forecast errors on organizational cost, and the usefulness of worker flexibility measures in offsetting their negative effects were evaluated in a labor intensive warehouse environment. Unlike past studies measuring forecast error in terms of forecast standard deviation, this study also considers the impact of forecast bias, which occurs when the mean of the error distribution is non‐zero. Results indicate that forecast bias is more damaging to warehouse cost, compared to forecast standard deviation. Workforce flexibility measures, such as worker cross‐training and proportion of full and part‐time labor, provide a solid buffer against forecast standard deviation. However, they are much less effective against forecast bias. This has important managerial implications as a large portion of forecast bias is managerially introduced.
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