Forecasting

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Assignment 2

I.
a) three period three period MA forecast
Period | Demand | 3MA |
1 | 12 | |
2 | 13 | |
3 | 14 | |
4 | 15 | 13 |
5 | 13 | 14 |
6 | 16 | 14 |
7 | 17 | 14.67 |
8 | 18 | 15.33 |

b) three period weighted MA forecast with weights of .5, .3, .2 (the highest weight is supposed to go to the closest demand period and then the other weights should go fromhighest to lowest from earliest to latest demand period)

Period | Demand | WMA |
1 | 12 | |
2 | 13 | |
3 | 14 | |
4 | 15 | 12.7 |
5 | 13 | 13.7 |
6 | 16 | 14.1 |
7 | 17 | 14.6 |
8 | 18 | 14.7 |

c) Exponential smoothing with Smoothing constant of .2. Assume initial forecast = initial demand
Period | Demand | Exp Sm |
1 | 12 | 12 |
2 | 13 | 12 |
3 | 14 | 12.2 |
4| 15 | 12.56 |
5 | 13 | 13.05 |
6 | 16 | 13.04 |
7 | 17 | 13.63 |
8 | 18 | 14.3 |
d) Calculate MAD for a,b,c
Period | Demand | 3MA | ET | |ET| |
1 | 12 | | | |
2 | 13 | | | |
3 | 14 | | | |
4 | 15 | 13 | 2 | 2 |
5 | 13 | 14 | -1 | 1 |
6 | 16 | 14 | 2 | 2 |
7 | 17 | 14.67 | 2.33 | 2.33 |
8 | 18 | 15.33 | 2.67 | 2.67 |
Total | | | | 10 |
MAD | | | |2 |

Period | Demand | WMA | ET | |ET| |
1 | 12 | | | |
2 | 13 | | | |
3 | 14 | | | |
4 | 15 | 12.7 | 2.3 | 2.3 |
5 | 13 | 13.7 | -0.7 | 0.7 |
6 | 16 | 14.1 | 1.9 | 1.9 |
7 | 17 | 14.6 | 2.4 | 2.4 |
8 | 18 | 14.7 | 3.3 | 3.3 |
Total | | | | 10.6 |
MAD | | | | 2.12 |

Period | Demand | Exp Sm | ET | |ET| |
1 | 12 | 12 | 0 | 0 |
2 | 13 | 12 | 1 | 1 |
3| 14 | 12.2 | 1.8 | 1.8 |
4 | 15 | 12.56 | 2.44 | 2.44 |
5 | 13 | 13.05 | -0.05 | 0.05 |
6 | 16 | 13.04 | 2.96 | 2.96 |
7 | 17 | 13.63 | 3.37 | 3.37 |
8 | 18 | 14.3 | 3.7 | 3.7 |
Total | | | | 15.3 |
MAD | | | | 1.91 |

II. Use a spreadsheet program to compare a three-period moving average forecasting model with a basic exponential smoothing model (Assume initial forecast =the average of the five periods of history). Five periods of past data exist (27, 26, 32, 41, and 28); the five future periods to be forecast have demands of 35, 43, 47, 28, and 38.

Develop MAD, MSE, MAPE, and tracking signal for each technique. Critique what you find.

Period | Demand | 3MA | |A-F/A| | ET | |ET| | ET^ | EX SM | |A-F/A| | ET | |ET| | ET^ |
1 | 27 | | | | | | | | || |
2 | 26 | | | | | | | | | | |
3 | 32 | | | | | | | | | | |
4 | 41 | 28.33 | 0.31 | 12.67 | 12.67 | 160.53 | | | | | |
5 | 28 | 33 | 0.18 | -5 | 5 | 25 | | | | | |
6 | 35 | 33.67 | 0.038 | 1.33 | 1.33 | 1.77 | 30.8 | 0.12 | 4.2 | 4.2 | 17.64 |
7 | 43 | 34.67 | 0.19 | 8.33 | 8.33 | 69.39 | 31.64 | 0.2642 | 11.36 | 11.36 | 129.05 |
8 | 47 | 35.33 |0.25 | 11.67 | 11.67 | 136.19 | 33.91 | 0.2785 | 13.09 | 13.09 | 171.35 |
9 | 28 | 41.67 | 0.49 | -13.67 | 13.67 | 186.87 | 36.53 | 0.3046 | -8.53 | 8.53 | 72.76 |
10 | 38 | 39.33 | 0.04 | -1.33 | 1.33 | 1.77 | 34.82 | 0.0836 | 3.18 | 3.18 | 10.11 |
Total | | | | | 54 | 581.52 | | 1.05 | | 40.36 | 400.91 |
MAD | | | | | 7.71 | | | | | 8.07 | |
MSE | | | | | | 83.07 | || | | 80.18 |
MAPE | | | 0.213=21.3% | | | | | 0.21=21% | | | |
Tracking Signal | | | | 1.82 | | | | | 2.8872 | | |
According to the findings from the distinct forecasting error techniques, the three periods moving average and exponential smoothing tools do not greatly differ from each other; therefore, the results of the calculations are consistent. Both seem to be closein relation to the mean as demonstrated with the MAD, MSE, and MAPE; however, the tracking signal yields greater accuracy to the three periods moving average tool than the exponential smoothing.

III. MacRonald’s Restaurant uses a monthly exponential smoothing forecast for demand of each of its products. MacRonald’s has four product families: burgers, chick, hoagies, and pizza. MacRonald’s...
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