Mean Squared Error (MSE):

This is the mean of the squares of the deviations of the forecast demands from the actual demand values.

As squares are taken of the differences among the actual and forecast demand, the MSE gives more weight to larger errors than to smaller ones. This measure shall be more appropriate while the cost of being in error (i.e. the cost of surplus or shortage of inventory or capacity) increases sharply with an increase in size of the error.