Problem:
Your manager is trying to determine what forecasting method to use. Based upon the following historical data, calculate the following forecast and specify what method you prefer and why.
|
MONTH
|
ACTUAL DEMAND
|
|
1
|
450
|
|
2
|
500
|
|
3
|
550
|
|
4
|
600
|
|
5
|
650
|
|
6
|
700
|
|
7
|
500
|
|
8
|
550
|
|
9
|
400
|
|
10
|
500
|
|
11
|
675
|
|
12
|
600
|
Required:
Question 1) Calculate the simple three-month moving average and Mean Absolute Deviation for periods 4-12.
Question 2) Calculate the weighted three-month moving average and Mean Absolute Deviation using weights of 0.50, 0.30, and 0.20 for periods 4-12.
Question 3) Calculate the single exponential smoothing forecast and Mean Absolute Deviation for periods 2-12 using an initial forecast (F1) of 61 and an alpha of 0.30.
Question 4) Which of the above forecasting methods do you prefer? Please explain why?
Solve the given numerical problem and illustrate step by step calculation.