A manager has monthly data for a period of two years.

He has to forecast the demand

for the next month. The choice of forecasting models that he has are as follows.
(i) 4 month moving average method
(ii) 10 month moving average method
(iii) 4 month weighted moving average with weights 0.4, 0.3, 0.2, 0.1
(iv) Exponential smoothing menthod with α = 0.2

t Dt
1 1651
2 1305
3 1617
4 1721
5 2015
6 2297
7 2606
8 2687
9 2292
10 1981
11 1696
12 1794
13 1806
14 1731
15 1733
16 1904
17 2036
18 2560
19 2679
20 2821
21 2359
22 2160
23 1802
24 1853
MAD Mean Absolute Deviation alpha 0.2
Measure to validate the accuracy of the forecast
 t Dt Average (Lt) Trend (Tt) Seasonality (St) Forecast (Ft) Error
1 1651
2 1305
3 1617
4 1721
5 2015
6 2297
7 2606
8 2687
9 2292
10 1981
11 1696
12 1794
13 1806
14 1731
15 1733
16 1904
17 2036
18 2560
19 2679
20 2821
21 2359
22 2160
23 1802
24 1853
25

MAD ###
α 0.2
β 0.2
γ 0.3
Average
A manager has been assigned the task of forecasting sales for a particular
vehicle type. He has monthly data for five years. The choice of forecasting
models that he has are as follows.
(i) 5 month moving average method
(ii) 18 month moving average method
(iii) 5 month weighted moving average with weights 0.4, 0.25, 0.2, 0.1, 0.05
(iv) Exponential smoothing menthod with α = 0.2

2015 2016 2017 2018 2019

Jan 42 52 58.24 66 78.2
Feb 31.6 39 43.68 50 58.6
Mar 36.96 45.5 50.96 57.7 68
Apr 105.6 130 145.6 165 195.5
May 140.08 234 262.08 297 351.9
Jun 179.5 221 247.5 280.5 332
Jul 152.8 65 72.8 82.5 97
Aug 42.24 52 58.2 66 78.2
Sep 31.68 39 43.68 49.5 58.6
Oct 52.8 65 72.8 82.5 97.75
Nov 126.72 156 174.7 198 234 α
Dec 158.4 195 218.4 247.5 293.25

Month Sales 5-month MA MAD (i) 18-month MA MAD (ii) WMA MAD (iii)
1 42
2 31.6
3 36.96
4 105.6
5 140.08
6 179.5 71.248 108.252 95.084 84.416
7 152.8 98.748 54.052 133.216 19.584
8 42.24 122.988 80.748 146.419 104.179
9 31.68 124.044 92.364 110.284 78.604
10 52.8 109.26 56.46 78.746 25.946
11 126.72 91.804 34.916 61.743 64.977
12 158.4 81.248 77.152 82.088 76.312
13 52 82.368 30.368 110.88 58.88
14 39 84.32 45.32 92.608 53.608
15 45.5 85.784 40.284 75.592 30.092
16 130 84.324 45.676 60.526 69.474
17 234 84.98 149.02 84.295 149.705
18 221 100.1 120.9 141.7 79.3
19 65 133.9 68.9 101.22 36.215555556 179.4 114.4
20 52 139.1 87.1 102.49 50.493333333 143.325 91.325
21 39 140.4 101.4 103.63 64.626666667 111.15 72.15
22 65 122.2 57.2 103.74 38.74 75.4 10.4
23 156 88.4 67.6 101.48 54.515555556 63.7 92.3
24 195 75.4 119.6 102.37 92.631111111 94.9 100.1
25 58.24 101.4 43.16 103.23 44.99 136.5 78.26
26 43.68 102.648 58.968 97.98 54.296666667 111.696 68.016
27 50.96 103.584 52.624 98.06 47.096666667 89.882 38.922
28 145.6 100.776 44.824 99.13 46.472222222 70.252 75.348
29 262.08 98.696 163.384 104.28 157.79666667 95.29 166.79
30 247.5 112.112 135.388 111.80 135.69666667 158.704 88.796
31 72.8 149.964 77.164 116.75 43.953333333 200.92 128.12
32 58.2 155.788 97.588 117.91 59.708888889 160.519 102.319
33 43.68 157.236 113.556 118.98 75.295555556 124.468 80.788
34 72.8 136.852 64.052 118.87 46.074444444 84.436 11.636
35 174.7 98.996 75.704 115.70 59.003333333 71.335 103.365
36 218.4 84.436 133.964 112.40 105.99777778 106.276 112.124
37 66 113.556 47.556 112.26 46.257777778 152.873 86.873
38 50 115.116 65.116 112.31 62.313333333 125.404 75.404
39 57.7 116.38 58.68 112.20 54.502222222 101.29 43.59
40 165 113.36 51.64 113.24 51.758888889 79.355 85.645
41 297 111.42 185.58 118.80 178.20333333 107.945 189.055
42 280.5 127.14 153.36 126.63 153.87 179.89 100.61
43 82.5 170.04 87.54 131.38 48.88 227.72 145.22
44 66 176.54 110.54 132.73 66.727777778 181.91 115.91
45 49.5 178.2 128.7 133.97 84.467777778 141.075 91.575
46 82.5 155.1 72.6 133.89 51.386666667 95.7 13.2
47 198 112.2 85.8 130.38 67.618888889 80.85 117.15
48 247.5 95.7 151.8 126.82 120.67888889 120.45 127.05
49 78.2 128.7 50.5 126.82 48.621111111 173.25 95.05
50 58.6 131.14 72.54 127.12 68.521111111 143.48 84.88
51 68 132.96 64.96 127.14 59.143333333 116.415 48.415
52 195.5 130.06 65.44 128.49 67.005555556 92.14 103.36
53 351.9 129.56 222.34 135.31 216.58888889 127.115 224.785
54 332 150.44 181.56 145.16 186.84444444 213.005 118.995
55 97 201.2 104.2 151.47 54.466666667 269.605 172.605
56 78.2 208.88 130.68 153.19 74.988888889 215.13 136.93
57 58.6 210.92 152.32 154.76 96.155555556 166.895 108.295
58 97.75 183.54 85.79 154.81 57.055555556 113.185 15.435
59 234 132.71 101.29 151.07 82.930555556 95.69 138.31
60 293.25 113.11 180.14 147.57 145.68055556 142.4275 150.8225
61 152.36 148.28 205.12

92.88 79.96 91.26

0.01884107

ES (α = 0.2) MAD (iv) 5-m MA 18-m MA ES

#N/A
42 10.40 #N/A #N/A 42
41.80 4.84 #N/A #N/A 39.92
41.71 63.89 #N/A #N/A 39.328
42.92 97.16 #N/A #N/A 52.5824
44.75 134.75 71.248 #N/A 70.08192
47.29 105.51 98.748 #N/A 91.96554
49.27 7.03 122.988 #N/A 104.1324
49.14 17.46 124.044 #N/A 91.75394
48.81 3.99 109.26 #N/A 79.73915
48.89 77.83 91.804 #N/A 74.35132
50.35 108.05 81.248 #N/A 84.82506
52.39 0.39 82.368 #N/A 99.54005
52.38 13.38 84.32 #N/A 90.03204
52.13 6.63 85.784 #N/A 79.82563
52.01 77.99 84.324 #N/A 72.9605
53.47 180.53 84.98 #N/A 84.3684
56.88 164.12 100.1 #N/A 114.2947
59.97 5.03 133.9 101.2156 135.6358
60.06 8.06 139.1 102.4933 121.5086
59.91 20.91 140.4 103.6267 107.6069
59.52 5.48 122.2 103.74 93.88552
59.62 96.38 88.4 101.4844 88.10841
 61.44 133.56 75.4 102.3689 101.6867
63.95 5.71 101.4 103.23 120.3494
63.85 20.17 102.648 97.97667 107.9275
63.47 12.51 103.584 98.05667 95.07801
63.23 82.37 100.776 99.12778 86.25441
64.78 197.30 98.696 104.2833 98.12352
68.50 179.00 112.112 111.8033 130.9148
71.87 0.93 149.964 116.7533 154.2319
71.89 13.69 155.788 117.9089 137.9455
71.63 27.95 157.236 118.9756 121.9964
71.10 1.70 136.852 118.8744 106.3331
71.14 103.56 98.996 115.6967 99.62649
73.09 145.31 84.436 112.4022 114.6412
75.83 9.83 113.556 112.2578 135.393
75.64 25.64 115.116 112.3133 121.5144
75.16 17.46 116.38 112.2022 107.2115
74.83 90.17 113.36 113.2411 97.30919 Moving Average (
76.53 220.47 111.42 118.7967 110.8474 400
80.68 199.82 127.14 126.63 148.0779 300
84.45 1.95 170.04 131.38 174.5623 200

Value
84.41 18.41 176.54 132.7278 156.1498 100
84.06 34.56 178.2 133.9678 138.1199 0
1 4 7 1 0 1 3 16 1 9 2 2 25 2 8 31 34 3 7
83.41 0.91 155.1 133.8867 120.3959
83.39 114.61 112.2 130.3811 112.8167 Data Point
85.55 161.95 95.7 126.8211 129.8534
88.60 10.40 128.7 126.8211 153.3827
88.41 29.81 131.14 127.1211 138.3462
87.85 19.85 132.96 127.1433 122.3969 Moving Ave
87.47 108.03 130.06 128.4944 111.5175 400
89.51 262.39 129.56 135.3111 128.314 300
94.45 237.55 150.44 145.1556 173.0312 200
Value

100
98.93 1.93 201.2 151.4667 204.825
0
98.89 20.69 208.88 153.1889 183.26
1 4 7 1 0 1 3 16 19 22 25 2 8 3 1 34 3
98.50 39.90 210.92 154.7556 162.248
97.75 0.00 183.54 154.8056 141.5184 Data Point
97.75 136.25 132.71 151.0694 132.7647
100.32 192.93 113.11 147.5694 153.0118
103.95 152.36 148.2778 181.0594
Exponential Sm
69.31 400
300
200
Value

100
0
1 4 7 10 13 16 1 9 2 2 25 2 8 3 1 34 3 7

Data Point
0
1 4 7 10 13 16 1 9 2 2 25 2 8 3 1 34 3 7

Data Point
Moving Average (5 month)

Actual
Forecast

6 1 9 2 2 25 2 8 31 34 3 7 40 4 3 46 49 5 2 55 5 8

Data Point

Moving Average

Actual
Forecast

16 19 22 25 2 8 3 1 34 37 40 4 3 4 6 4 9 52 55 58
Data Point

Exponential Smoothing

Actual
Forecast

16 1 9 2 2 25 2 8 3 1 34 3 7 4 0 43 46 4 9 5 2 55 58
Data Point
16 1 9 2 2 25 2 8 3 1 34 3 7 4 0 43 46 4 9 5 2 55 58
Data Point
 2015 2016 2017 2018 2019
Jan 42 52 58.24 66 78.2
Feb 31.6 39 43.68 50 58.6
Mar 36.96 45.5 50.96 57.7 68
Apr 105.6 130 145.6 165 195.5
May 140.08 234 262.08 297 351.9
Jun 179.5 221 247.5 280.5 332
Jul 152.8 65 72.8 82.5 97
Aug 42.24 52 58.2 66 78.2 α
Sep 31.68 39 43.68 49.5 58.6 β
Oct 52.8 65 72.8 82.5 97.75
Nov 126.72 156 174.7 198 234
Dec 158.4 195 218.4 247.5 293.25

Annual Sales 1100.38 1293.5 1448.64 1642.2 1943

Year 1 2 3 4 5 6
Sales 1100.38 1293.5 1448.64 1642.2 1943
Average (Lt) 875.36 1143.175 1386.207 1618.143 1872.182
Trend (Tt) 203.39 216.275 221.6264 223.6884 229.7585
Forecast (Ft) 1078.75 1359.45 1607.833 1841.832 2101.941
Error 214.75 89.19 34.3666 101.1682

MAD 109.8687
 2500

0.3 2000
0.2 f(x) = 203.394 x + 875.362
1500 R² = 0.984039027740528

1000

500

0
0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5
Month Sales Average (Lt) Trend (Tt) Seasonality (St) Forecast (Ft) Error
1 42 0.4580
2 31.6 0.3446
3 36.96 0.4031
4 105.6 1.1516
5 140.08 1.5276
6 179.5 1.9575
7 152.8 1.6663
8 42.24 0.4606
9 31.68 0.3455
10 52.8 0.5758
11 126.72 1.3819
12 158.4 158.4 0 1.7274
13 52 149.43 -1.7947492 0.4250 72.550936949 20.55094
14 39 140.74 -3.1731296 0.4277 50.875030994 11.87503
15 45.5 132.63 -4.1603403 0.5060 55.447647229 9.947647
16 130 125.35 -4.7836953 1.4627 147.94642241 17.94642
17 234 127.09 -3.4792923 2.0800 184.18427298 49.81573
18 221 121.47 -3.9078342 2.5033 241.97183009 20.97183
19 65 101.85 -7.0499938 1.8578 195.89713932 130.8971
20 52 98.42 -6.3265854 0.6191 43.66921334 8.330787
21 39 96.25 -5.4947953 0.4670 31.815815151 7.184185
22 65 95.18 -4.6095714 0.7807 52.257177769 12.74282
23 156 95.03 -3.7170094 1.8744 125.16371041 30.83629
24 195 95.63 -2.8542794 2.3391 157.74293627 37.25706
25 58.24 101.63 -1.084165 0.5969 39.431833528 18.80817
26 43.68 100.86 -1.0211946 0.5577 43.006624848 0.673375
27 50.96 100.01 -0.9860592 0.6588 50.515556468 0.444444
28 145.6 99.13 -0.965524 1.9034 144.84906565 0.750934
29 262.08 103.73 0.1479698 2.8379 204.17901602 57.90098
30 247.5 102.88 -0.0524678 3.2251 260.04399219 12.54399
31 72.8 90.10 -2.5980115 2.1002 191.02711401 118.2271
32 58.2 88.80 -2.3379768 0.8158 54.174998693 4.025001
33 43.68 87.87 -2.0554147 0.6162 40.380815181 3.299185
34 72.8 87.31 -1.7580489 1.0308 66.996369128 5.803631
35 174.7 87.08 -1.4517722 2.4762 160.34808171 14.35192
36 218.4 87.18 -1.1421314 3.0907 200.29278033 18.10722
37 66 90.94 -0.160886 0.8147 51.356454117 14.64355
38 50 90.55 -0.2056477 0.7233 50.624051384 0.624051
39 57.7 89.80 -0.3164785 0.8516 59.52548864 1.825489
40 165 88.92 -0.4280631 2.4600 170.30963827 5.309638
41 297 91.72 0.2183836 3.8093 251.13571616 45.86428
42 280.5 90.95 0.0196691 4.1503 296.52162327 16.02162
43 82.5 80.63 -2.0478178 2.4071 191.05311289 108.5531
44 66 79.05 -1.9549769 1.0663 64.106576556 1.893423
45 49.5 77.74 -1.8252592 0.8072 47.501825063 1.998175
46 82.5 76.74 -1.6606114 1.3533 78.256912356 4.243088
47 198 76.06 -1.4653817 3.2573 185.91410684 12.08589
48 247.5 75.69 -1.2458362 4.0717 230.53619224 16.96381
49 78.2 78.75 -0.3838915 1.1126 60.645111127 17.55489
50 58.6 78.90 -0.2779432 0.9461 56.684161661 1.915838
51 68 78.87 -0.2287747 1.1103 66.953188798 1.046811
52 195.5 78.80 -0.1954186 3.2043 193.44857037 2.05143
53 351.9 81.36 0.3554176 5.1068 299.44228164 52.45772
54 332 81.37 0.2864927 5.3743 339.15146503 7.151465
55 97 73.39 -1.3680142 2.8037 196.56595613 99.56596
56 78.2 72.28 -1.315125 1.3908 76.790170868 1.409829
57 58.6 71.29 -1.2499052 1.0538 57.283901016 1.316099
58 97.75 70.48 -1.162544 1.7694 94.79425236 2.955748
59 234 69.82 -1.0616989 4.2627 225.78804791 8.211952
60 293.25 69.41 -0.9312966 5.3391 279.97597053 13.27403
61 76.190368919

MAD 21.92145
 Average 91.69833

α 0.2
β 0.2
γ 0.3

400

350

300

250

200

150

100

50

0
1 2 3 4 5 6 7 8 9 10 11 12

Year 1 Sales Year 2 sales Year 3 sales

Year 4 sales Year 5 sales
Step
1 Identify the cycle time p
2 Calculate the average demand for the first cycle.
3 Divide the demand for each period in the first cycle by the average demand to
initialize the seasonality factor for each period
4 In order to forecast for first period in second cycle, we need to initialize the
average and trend for last period in first cycle
4.1 Either use the regression model based on first year data or assume that all demand
can be attributed to average and there is no trend to start with
5 Forecast for the first period of the second cycle = (average + trend for last period
of first cycle)*seasonality factor for first period in the first cycle
6 Update the average as alpha * deseasonalized demand + (1 - alpha) *
deseasonalized forecast
7 Update the trend as beta * change in averages between successive periods + (1 -
beta) * trend from previous period

8 Update the seasonality factor as gamma * (demand / average) for current period +
(1 - gamma) * corresponding factor for the period from the previous cycle
9 Forecast for second period and continue this procedure till the end.
deseasonalized demand = demand for period / seasonality factor from corresponding
period in the previous cycle