This relationship allows use of the

This relationship allows use of the normal probability tables to specify limits for the tracking signal. If the tracking signal falls outside those limits, the forecasting model no longer is tracking demand adequately. A tracking system is useful when forecasting systems are computerized because it alerts analysts when forecasts are getting far from desirable limits. Figure 8.8 shows tracking signal results for 23 periods plotted on a control chart. Thecontrol chart is useful for determining whether any action needs to be taken to improve the forecasting model. In the example, the first 20 points cluster around 0, as we would expect if the forecasts are not biased. The CFE will tend toward 0. When the underlying characteristics of demand change but the forecasting model does not, the tracking signal eventually goes out of control. The steady increase after the 20th point in Figure 8.8 indicates that the process is going out of control. The 21st and 22nd points are acceptable, but the 23rd point is not.