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John Ballantyne Manufacturing Services www.jbms.net.

au

MOVING AVERAGES
Moving Averages
Sales 3-month 5-month 7-month
Jan 92
Feb 83 Copy these formulae
Mar 66 down to "Jan"
Apr 74 80
May 75
Jun 84 78
Jul 84
Aug 81 80
Sep 75
Oct 63
Nov 91
Dec 84
Jan

Moving Averages
100
90
80
70
60
50 Sales
Qty

40 3-month
30 5-month
7-month
20
10
0
Feb Apr Jun Aug Oct Dec
Jan Mar May Jul Sep Nov Jan
John Ballantyne Manufacturing Services www.jbms.net.au

EXPONENTIAL SMOOTHING Enter the number


Number of Months in average: 3 of months in Different Sales Pattern
moving average
Smoothing Factor: 0.5
Sales Forecast
Jan 92 92 Jan 90
Feb 83 92 Feb 100
Mar 66 Copy this formula Mar 300
down to "Jan"
Apr 74 Apr 500
May 75 May 700 Copy these sales
Jun 84 Jun 1200 to Col "C" to see
Jul 84 Jul 1500 different effect
Aug 81 Aug 1000
Sep 75 Sep 700
Oct 63 Oct 400
Nov 91 Nov 200
Dec 84 Dec 100
Jan Jan

Exponential Smoothing
100 Some cells are protected without password.
90 To "Unprotect" select "Tools", "Protection"
80
70
60
50
40
30 Sales
20 Forecast
10
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
John Ballantyne Manufacturing Services www.jbms.net.au

period>> 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 100 100 100 100 100 100 100 100 100 100 100 100 100 Experiment with forecasts and
Actual Sales 90 110 90 100 110 95 105 90 110 95 110 95 actual sales to see the effect on
MAPE. "Tracking Signal" and
theoretical Safety Stock
Error -10 10 -10 0 10 -5 5 -10 10 -5 10 -5
"Cumulative Error" -10 0 -10 -10 0 -5 0 -10 0 -5 5 0
Absolute Error 10 10 10 0 10 5 5 10 10 5 10 5 A Tracking Signal greater than
Absolute Percentage Error 10% 10% 10% 0% 10% 5% 5% 10% 10% 5% 10% 5% (say) 4.5 shows an out-of-
Mean Absolute Deviation (error) 8 ("MAD") control forecast…...
Tracking Signal: 0.0
"MAPE" 8% (Mean Absolute Percentage Error)

No. of Standard Deviations: 2 (1=84%Cust Serv, 2=97%, 3=99.97%)


Theoretical Safety Stock: 19
Theoretical Safety Stock as Percent of Forecast: 19%
….Safety Stock cannot be set
Forecast v Sales History for an out-of-control forecast.
120
100
80 Change the number of Std.
Deviations (customer service
60 levels) and note the effect on
Qty

safety stock.
40
Forecast
20 Actual Sales
0
Try these 1 2 3 4 5 6 7 8 9 10 11 12
Month

Various "Actual Sales"…..


In control-high MAPE 50 180 150 25 90 150 190 10 120 120 200 20
In control - low MAPE 90 110 90 100 110 95 105 90 110 95 110 95
Badly Biased 50 100 110 25 70 80 100 10 100 90 110 20
A "Salesman's Forecast" 110 120 105 110 100 120 130 110 120 105 100 120

An example of how sales staff under-state the true potential


sales in order to ensure their bonus.
John Ballantyne Manufacturing Services www.jbms.net.au

From Student Guide


SALES SALES
year Last New
before Year AVE INDEX Forecast
Jan 10 12 11 0.05 0
Feb 10 12 11 0.05 0
Mar 10 12 11 0.05 0
Apr 50 55 53 0.26 0
May 150 160 155 0.76 0
Jun 400 420 410 2.00 0
Jul 600 620 610 2.98 0
Aug 700 730 715 3.49 0 Enter new average for next
Sep 350 360 355 1.74 0 year's forecast
Oct 100 105 103 0.50 0
Nov 10 12 11 0.05 0
Dec 10 12 11 0.05 0
Average Sales: 2400 2510 205 12 New Average> 0

Seasonal Indexed Forecast


800
700 SALES Last Linear
Year Regression for
600 Column I
500 Linear
400 Regression for
SALES Last
300 Year
200 Column I
100
0
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