What is a common cause of forecast errors?

A common cause of forecast errors is random variation from average demand. In forecasting, it is essential to recognize that actual demand can fluctuate due to various unpredictable factors, such as changes in customer preferences, economic conditions, or unforeseen events. These random variations can cause actual demand to deviate from what was predicted, leading to forecast errors.

It's important to understand that while seasonality may also contribute to inaccuracies in forecasts, the random variation is a more fundamental and broader cause. Random variation is inherent in any forecasting process and needs to be accounted for to improve the accuracy of predictions. By acknowledging the presence of random fluctuations in demand, businesses can better prepare for potential discrepancies between forecasted and actual demand, ultimately enhancing their operational planning and performance.