How to Calculate MAPE Formula Fast in Excel

Key Takeaways:

• • MAPE translates forecast errors into easy-to-understand percentages, making comparisons across datasets straightforward.
  • Make sure there are no zeroes or errors in your dataset to avoid misleading results in MAPE calculations.
  • Use formulas like =AVERAGE(ABS((actual - forecast) / actual) * 100) for quick and reliable calculations.
  • Businesses leverage MAPE to improve inventory management, refine demand planning, and boost client satisfaction.
  • Exclude non-recurring outliers from your data to maintain reliability.

 

Introduction to Mean Absolute Percentage Error

Forecast’s Accuracy

For an accurate data analysis, you need to make sure that the forecast values that you are using are reliable. The accuracy of the forecast will depend on how close the forecast’s values are to the actual values. High accuracy helps you to reduce inventory cost, avoid stockout and improve service level.

What is MAPE?

MAPE is a useful metric that allows you to check the accuracy of the forecast model. It tells you how far the forecast value is from the actual numbers. MAPE expresses error in percentage form and is easy to understand. It allows you to quickly compare different forecast models as well.

A thumb rule for MAPE is that a lower MAPE means the accuracy of the forecast is better.

 

How to Calculate MAPE

Prepare Data

The first step should be to organise the data efficiently. You need to create three columns for months, actual sales, and forecasted sales amounts.

Try to include long historical data, as it gives a strong base for assessing the accuracy of the forecasts. But, if that is not possible, you can use the most recent data as well.

Formula Breakdown

When calculating MAPE, it is important to know the components of this formula.

• • Compute the Absolute Percentage Error (APE)
    • First, you need to get the absolute difference between the actual and forecasted values.
    • Then, divide the difference by the actual value
    • Multiply it by 100

=ABS(actual - forecast)/actual * 100

• • Derive the MAPE – Calculate the average of all the APEs

=AVERAGE(range of APEs)

The final result will be a percentage figure and will tell us the average deviation of the forecasts from the actual values.

 

Tips & Tricks

Automate the Process

Instead of multiple steps, you can also use an array function to get MAPE in a single step.

STEP 1: Use this formula:

STEP 2: Press Enter.

This formula returns the MAPE value.

Common Mistakes

Some of the common mistakes that you need to avoid are:

• • Using zeros or negative numbers in actual values. This will mislead the analysis.
  • Providing incorrect data can disrupt the calculations. Garbage in, garbage out holds true for MAPE.
  • Including outliers in the calculations can distort the mean value.

Check Data Inputs are Reliable

Before starting the calculations, it is important to check that the data inputs are reliable.

• • Check that the forecasts are matched with the actual demand and not sales.
  • Maintain a well strcutured singel dataset with all relevant data.
  • Assign weights ot different items to quantify their importance.
  • Track the history of active vs inactive items. You should know the items that are currently influencing the demand.

 

Real-world Applications of MAPE

There are several case studies where MAPE has affected business decisions and provided benefits:

• Retail companies can use MAPE for inventory planning. This will help them in reducing overstock and improve fianncial health.
• Manufacturing firms can use MAPE for demand planning. This will help you to schedule production and manage inventory.

 

FAQs

What is MAPE?

MAPE stands for Mean Absolute Percentage Error. It’s a measure used to determine the accuracy of forecast models by calculating the average percentage error between the forecasted and actual values. The lower the MAPE, the more accurate the model’s predictions are.

How to calculate MAPE formula?

You can calculate MAPE by following the steps below:

• • Subtract the forecasted value from the actual value
  • Get the absolute value by removing any negative sign
  • Divide by the actual value
  • Multiply by 100
  • Average of all MAPEs

What Is the Limitation of MAPE in Excel?

The main limitation of working with MAPE is that the data should have zeros in the actual value. Dividing any number by 0 will cause errors.

How to automate the calculation of MAPE in Excel?

For large datasets, you can automate the calculation of MAPE by writing custom functions in Excel.