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Part 1: Simple Exponential Smoothing (α = 0.4) : t t t t

This document provides instructions for forecasting demand data over 8 quarters using 3 different forecasting models: 1) Simple exponential smoothing, 2) Holt's model, and 3) Winter's model. For each model, the document specifies the parameters to use and the steps to take to generate forecasts for periods 1-8, including estimating initial level, trend and seasonal components as needed. It concludes by asking which forecasting method is best and why.

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44 views

Part 1: Simple Exponential Smoothing (α = 0.4) : t t t t

This document provides instructions for forecasting demand data over 8 quarters using 3 different forecasting models: 1) Simple exponential smoothing, 2) Holt's model, and 3) Winter's model. For each model, the document specifies the parameters to use and the steps to take to generate forecasts for periods 1-8, including estimating initial level, trend and seasonal components as needed. It concludes by asking which forecasting method is best and why.

Uploaded by

Tush
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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For Part 1 and 2, using the following demand data over two years and a total of eight

quarters.
 

Year, Trend Forecast


Period t Demand Dt Level Lt
Quarter Tt Ft
Assume
0
L0=220
1 Year 1, Q1 225
2 Year 1, Q2 174
3 Year 1, Q3 241
4 Year 1, Q4 727
5 Year 2, Q1
6 Year 2, Q2
7 Year 2, Q3
8 Year 2, Q3

Part 1: Simple Exponential Smoothing (α = 0.4)

1. Estimate level component (Lt) for periods 1-4.


2. Forecast demand (Ft) for periods 1-4.
3. Forecast demand (Ft) for periods 5-8.

Part 2: Holt’s model (α = 0.4, β = 0.2)


Obtain the initial level L0 and trend T0 using the regression approach discussed in the
text.

1. Period 1: Estimate level component (L1) and trend component (T1).


2. Period 2: Estimate level component (L2) and trend component (T2).
3. Period 3: Estimate level component (L3) and trend component (T3).
4. Period 4: Estimate level component (L4) and trend component (T4).
5. Forecast demand (Ft) for periods 1-4.
6. Forecast demand (Ft) for periods 5-8.

Part 3: Winter’s Model


Now, assume the following is the demand for the past 4 years:

Year Quarter Period Demand Level Trend Seasonal


factors

    0   L0 = ? T0 = ?  

1 I 1 225     S1 = ?

  II 2 174     S2 = ?

  III 3 241     S3 = ?

  IV 4 727     S4 = ?

2 I 5 351      

  II 6 214      

  III 7 346      

  IV 8 706      

3 I 9 412      

  II 10 277      

  III 11 255      

  IV 12 825      

4 I 13 549      

  II 14 438      

  III 15 431      
  IV 16 1203      

5 I 17 ?      

  II 18 ?      

  III 19 ?      

  IV 20 ?      

 
Use the winter’s method with α = 0.4, β = 0.2, γ = 0.1
Obtain the initial level and trend estimates using the regression method.
Obtain the initial seasonal factors using the static method.
Forecast the demand for Year 5 (Period 17-20).
Calculate forecast errors: MSE, MAD, and TS.
 
Hint: Similar to the Tahoe Salt example.
First, obtain the initial level (L0) and trend (T0) estimates and the initial seasonal factors
(S1-S4) using the static method (p.182-p.187).
Second, update level, trend, and seasonal factors using Eq. 7.18, 7.19, 7.20.
Third, forecast the demand for Year 5 (Period 17-20) using Eq. 7.17.
 
PART 4:
Which forecasting method is the best? Why?

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