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8.1A+Exponential+Smoothing+Forecasting+Model Stu

This document provides an example of using simple exponential smoothing to forecast demand over 7 periods with a smoothing constant (α) of 0.5. It shows how to initialize the forecast for period 2 using the actual demand from period 1, and then update the forecast for each subsequent period by taking the weighted average of the previous forecast and the most recent actual demand. The mean absolute deviation (MAD) of the forecasts is calculated to be 6.86. Finally, it shows how forecasts can differ based on the smoothing constant value used.

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Minda Tin
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39 views

8.1A+Exponential+Smoothing+Forecasting+Model Stu

This document provides an example of using simple exponential smoothing to forecast demand over 7 periods with a smoothing constant (α) of 0.5. It shows how to initialize the forecast for period 2 using the actual demand from period 1, and then update the forecast for each subsequent period by taking the weighted average of the previous forecast and the most recent actual demand. The mean absolute deviation (MAD) of the forecasts is calculated to be 6.86. Finally, it shows how forecasts can differ based on the smoothing constant value used.

Uploaded by

Minda Tin
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Exponential Smoothing Forecasting Model

Video production under the supervision of


Prof. Ronald S. Lau, HKUST – ISOM
Simple exponential smoothing: Example
Use a simple exponential smoothing model with  = 0.5 to determine the
forecast for periods 2 to 7.

Actual Forecast
Period Demand Forecast Error
t At Ft |At - Ft|
1 79
2 84
3 83
4 81
5 98
6 100
7 ?
Simple exponential smoothing: Example
Set the initial forecast. Initialize F2 = A1

Actual Forecast
Period Demand Forecast Error
t At Ft |At - Ft|
1 79
2 84 79.00
3 83
4 81
5 98
6 100
7 ?
Simple exponential smoothing: Example
Determine the forecast for period 3.

Actual Forecast
Period Demand Forecast Error
t At Ft |At - Ft|
1 79
2 84 79.00
3 83 81.50
4 81
5 98
6 100
7 ?
F3 = F2 +  (A2 – F2)
F3 = 79 + 0.5 (84 – 79)
Simple exponential smoothing: Example
Continue to update the forecast for periods 4 to 7.
Ft = Ft-1 +  (At-1 – Ft–1)

Actual Forecast
Period Demand Forecast Error
t At Ft |At - Ft|
1 79
2 84 79.00
3 83 81.50
4 81 82.25
5 98 81.63
6 100 89.81
7 ? 94.91
Simple exponential smoothing: Example

Determine the MAD for periods 2 to 6:

Actual Forecast
Period Demand Forecast Error
t At Ft |At - Ft|
1 79
2 84 79.00 5.00
3 83 81.50 1.50
4 81 82.25 1.25
5 98 81.63 16.37
6 100 89.81 10.19
7 ? 94.91
MAD = 6.86

n
Mean Absolute Deviation (MAD) =  | At - Ft |/ n
t
Effect of smoothing constants

Forecast based on  = 0.1 vs.  = 0.5)


105

100
Actual
95
Forecast
Occupancy

90 ( = 0.5)
85
Forecast
80 ( = 01
.)

75
1 2 3 4 5
0

Period

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