Forecast Model using

Moving Average Method
Mean Absolute Deviation (MAD)
and Squared Error (MSE) Method.

Submitted by

Md. Tahmidul Haq Ansari
abir_ansari@yahoo.com

1

Md. Tahmidul Haq Ansari

Forecasting with Moving Average Method, Mean Absolute Deviation (MAD) and Squared Error
(MSE) Method.
Dalworth Companyโ€™s past 12 months data:
Month
January
February
March
April
May
June
July
August
September
October
November
December

Monthly Demand (Unit)
20
24
27
31
37
47
53
62
54
36
32
29

Forecasting with 3-Months Moving Average Method
Following section shows forecasted demand for Dalworth Company base on past 12 months data. Here
we have used 3-month moving average method to calculate future demand.
Month
January
February
March
April
May
June
July
August
September
October
November
December

2

Actual Data (Dt)
20
24
27
31
37
47
53
62
54
36
32
29

Md. Tahmidul Haq Ansari

Ft+1 = ๐‘†๐‘ข๐‘š

๐‘œ๐‘“ ๐‘™๐‘Ž๐‘ ๐‘ก ๐‘› ๐‘‘๐‘’๐‘š๐‘Ž๐‘›๐‘‘๐‘  ๐‘›

(27+24+20)/3
(31+27+24)/3
(27+31+37)/3
(47+37+31)/3
(53+47+37)/3
(62+53+47)/3
(54+62+53)/3
(36+54+62)/3
(32+36+54)/3

Forecast (Ft )

$
$
$
$
$
$
$
$
$

23.67
27.33
31.67
38.33
45.67
54.00
56.33
50.67
40.67

Forecasting with 4-Months Moving Average Method
Following section shows forecasted demand for Dalworth Company base on past 12 months data. Here
we have used 4-month moving average method to calculate future demand.
Month
January
February
March
April
May
June
July
August
September
October
November
December

3

Actual Data (Dt)
20
24
27
31
37
47
53
62
54
36
32
29

Md. Tahmidul Haq Ansari

Ft+1 = ๐‘†๐‘ข๐‘š

๐‘œ๐‘“ ๐‘™๐‘Ž๐‘ ๐‘ก ๐‘› ๐‘‘๐‘’๐‘š๐‘Ž๐‘›๐‘‘๐‘  ๐‘›

(31+27+24+20)/4
(37+31+27+24)/4
(47+37+31+27)/4
(53+47+37+31)/4
(62+53+47+37)/4
(54+62+53+47)/4
(36+54+62+53)/4
(32+36+54+62)/4

Forecast (Ft )

$
$
$
$
$
$
$
$

25.50
29.75
35.50
42.00
49.75
54.00
51.25
46.00

Forecasting with Mean Absolute Deviation (MAD) Method
The following table calculates performance of 3-months moving average method and 4-months moving
average method with mean absolute deviation (MAD) method.
3-Months Moving Average

Actual
Month

4-Months Moving Average

Demand,

Forecast,

Error,

Absolute, Error,

Forecast,

Error,

Absolute, Error,

Dt

Ft

Et = Dt โ€“ Ft

IEtI

Ft

Et = Dt โ€“ Ft

IEtI

April

31

23.67

7.33

7.33

May

37

27.33

9.67

9.67

25.50

11.50

11.50

June

47

31.67

15.33

15.33

29.75

17.25

17.25

July

53

38.33

14.67

14.67

35.50

17.50

17.50

August

62

45.67

16.33

16.33

42.00

20.00

20.00

September

54

54.00

0

0

49.75

4.25

4.25

October

36

56.33

-20.33

20.33

54.00

-18.00

18.00

November

32

50.67

-18.67

18.67

51.25

-19.25

19.25

December

29

40.67

-11.67

11.67

46.00

-17.00

17.00 ๐ˆ๐„๐ญ

๐ˆ = 114

Calculation of MAD ๐ˆ๐„๐ญ

๐ˆ ๐‘›

=

114
9

= 12.67 ๐ˆ๐„๐ญ

๐ˆ = 124.75 ๐ˆ๐„๐ญ

๐ˆ ๐‘›

=

124.75
8

= 15.59

Recommendation: According to our findings, 3-months moving average contains less error than
4-months moving average. So we recommend, 3-months moving average method.

4

Md. Tahmidul Haq Ansari

Forecasting with Squared Error (MSE) Method
The following table calculates performance of 3-months moving average method and 4-months moving
average method with mean squared error (MSE) method.
3-Months Moving Average

Actual
Month

4-Months Moving Average

Demand,

Forecast,

Error,

Error squared

Forecast,

Error,

Error squared

Dt

Ft

Et = Dt โ€“ Ft ๐‘ฌ๐Ÿ๐’•

Ft

Et = Dt โ€“ Ft ๐‘ฌ๐Ÿ๐’•

April

31

23.67

7.33

53.78

May

37

27.33

9.67

93.44

25.50

11.50

132.25

June

47

31.67

15.33

235.11

29.75

17.25

297.56

July

53

38.33

14.67

215.11

35.50

17.50

306.25

August

62

45.67

16.33

266.78

42.00

20.00

400.00

September

54

54.00

0

0.00

49.75

4.25

18.06

October

36

56.33

-20.33

413.44

54.00

-18.00

324.00

November

32

50.67

-18.67

348.44

51.25

-19.25

370.56

December

29

40.67

-11.67

136.11

46.00

-17.00

289.00 ๐‘ฌ๐Ÿ๐’•

= 1762.22 ๐‘ฌ๐Ÿ๐’•

Calculation of MSE

1762.22
=
= 195.80 ๐‘›

9 ๐‘ฌ๐Ÿ๐’•

= 2137.69 ๐‘ฌ๐Ÿ๐’• ๐‘›

=

2137.69
= 267.21
8

Recommendation: According to our findings, 3-months moving average contains less error than 4months moving average. So we recommend, 3-months moving average method.

5

Md. Tahmidul Haq Ansari

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