The tracking signal is a measurement that indicates there may be bias in the forecast model. The tracking signal is the ratio of the cumulative forecast error to the mean absolute deviation (MAD). It measures how well the forecast is tracking the actual demand over time. A tracking signal of zero means that the forecast is perfectly accurate. A tracking signal within the range of -4 to +4 is considered acceptable. A tracking signal outside this range indicates that the forecast is consistently overestimating or underestimating the demand, which implies that there is bias in the forecast model. Bias is the tendency of a forecast to be consistently higher or lower than the actual demand. Bias can be caused by factors such as inaccurate data, inappropriate forecasting methods, or changes in demand patterns. References:
Managing Supply Chain Operations, Chapter 5: Demand Management and Forecasting, Section 5.2:
Forecasting Methods, Subsection 5.2.3: Forecast Accuracy and Control
CPIM Exam Content Manual, Module 3: Demand, Section 3.2: Forecasting, Subsection 3.2.2:
Forecasting Methods, Subsubsection 3.2.2.3: Forecast Accuracy and Control

Excess capacity is the amount of capacity that is available beyond the normal or expected demand. Safety stock is the inventory that is held to protect against uncertainties in demand, supply, or lead time. Excess capacity can be a good substitute for safety stock when the cost of excess capacity is less than the cost of an additional unit of safety stock in the same period. This means that the opportunity cost of having idle resources is lower than the carrying cost of holding extra inventory. In this case, excess capacity can be used to produce more units in response to demand fluctuations, rather than relying on safety stock to meet customer orders. References:
*[CPIM Part 1 Learning System, Module 4: Inventory Management, Section 4.2: Inventory Management Policies and Objectives]
*[CPIM Part 2 Learning System, Module 1: Supply Chain Strategy, Section 1.3: Capacity Management]