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    Lecture 11

    Uploaded by

    Nikhil Kumar

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    © All Rights Reserved
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    Lecture 11

    Uploaded by

    Nikhil Kumar
    15 views11 pages

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    15 views11 pages

    Lecture 11

    Uploaded by

    Nikhil Kumar

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    © All Rights Reserved
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    Demand Forecasting

    EXPONENTIAL SMOOTHING METHOD

    An attractive feature of this method is that forecasts made with this model will include a portion of every piece of historical
    demand. Furthermore, there will be different weights placed on these historical demand values, with older data receiving
    lower weights. At first glance this may not be obvious, however, this property is illustrated on the following page.
    EXPONENTIAL SMOOTHING METHOD
    Numerical Problem 3
    The monthly demand for units manufactured by Ace designers has been as follows:

    Month Units 1. Use the exponential smoothing method to forecast the


    May 100 number of units for June to January. The initial forecast
    for May was 105 units; ! =.2
    June 80
    July 110 2. Choose between responsive and stable forecast
    August 115
    September 105
    October 110
    November 125
    December 120
    Numerical Problem 4
    Trend Prediction What is the forecasted demand for next three periods?

    Week Units Week Units


    1 28 9 61
    2 27 10 39
    3 44 11 55
    4 37 12 54
    5 35 13 52
    6 53 14 60
    7 38 15 60
    8 57 16 75
    Double exponential smoothing: Holt’s method
    Stationary and Trend Component
    Additive :Level + Trend Multiplicative: Level*Trend

    Period Demand
    1 77
    2 83
    3 89
    4 92
    5 99
    6 108
    7 122
    8 115
    9 122
    10 107
    Double exponential smoothing: Holt’s method

    Period Demand Exponential Trend Forecast


    Smoothing Adjustment
    1 77
    2 83 77 0
    3 89 80 1.5 81.5
    4 92 84.5 3 Alpha=beta=.5
    5 99 88.25 3.375
    6 108
    7 122
    8 115
    9 122
    10 107
    Forecasting errors

    A separate note is shared as a part of the lecture reference material.


    Mean Forecasting errors
    Mean Absolute Deviation
    Mean Squared Error

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