Question 1

1.1) Perform a descriptive analysis (Use Excel) of sales data for Karen that summarizes your findings.

Restaurant 1 Restaurant 2 Restaurant 3

175.333 183.333 194.083

Mean 3 Mean 3 Mean 3
12.3308 12.7103
Standard Error 12.9207 Standard Error 8 Standard Error 3
Median 165 Median 180 Median 188
Mode 152 Mode 193 Mode #N/A
44.7586 42.7154 44.0298
Standard Deviation 1 Standard Deviation 1 Standard Deviation 6
2003.33 1824.60 1938.62
Sample Variance 3 Sample Variance 6 Sample Variance 9
- - -
Kurtosis 1.13806 Kurtosis 1.18058 Kurtosis 0.92254
0.35706 0.21857 0.29122
Skewness 8 Skewness 6 Skewness 3
Range 136 Range 125 Range 139
Minimum 110 Minimum 122 Minimum 126
Maximum 246 Maximum 247 Maximum 265
Sum 2104 Sum 2200 Sum 2329
Count 12 Count 12 Count 12
Largest(1) 246 Largest(1) 247 Largest(1) 265
Smallest(1) 110 Smallest(1) 122 Smallest(1) 126
Confidence 28.4382 Confidence 27.1400 Confidence 27.9752
Level(95.0%) 7 Level(95.0%) 8 Level(95.0%) 4

Steps:

Go to data -> Data Analysis -> Descriptive statistics -> ok -> Select input and output range and check the
other box of summary statistics -> ok

1.2) Use exponential smoothing method using coefficient as 0.5 and 0.7 to forecast the inventory for
the next January. Represent data graphically too
and
1.3) Use root-mean-squared error (RMSE) to evaluate these two forecasts.

In Exponential smoothing, the constant α is always between 0-1. α closer to 1 means high weightage
is given to the immediate past, and α closer to 0 means low weightage is given to the immediate
past.
 Now here, constant α is 0.5 and 0.7. We can solve the sum in the following ways:

I
months RMSE RMSE
Restaurant
0.5 0.5 0.7 0.7
January 200 #N/A #N/A #N/A #N/A
Februar
235
y 200 #N/A 200 #N/A
march 232 217.5 #N/A 224.5 #N/A
April 178 224.75 #N/A 229.75 #N/A
may 184 201.375 34.74101 193.525 36.32865
June 140 192.6875 29.98724 186.8575 30.68679
July 145 166.3438 41.88646 154.0573 40.67929
Aug 152 155.6719 34.31918 147.7172 28.09736
Sept 110 153.8359 32.88876 150.7152 27.66467
Oct 130 131.918 28.22899 122.2145 24.20813
Nov 152 130.959 25.42145 127.6644 24.0602
Dec 246 141.4795 28.09503 144.6993 27.75224
    255.5681 239.4773

0.5 RMSE
300
200 Actual
Value

100 Forecast
0
1 2 3 4 5 6 7 8 9 101112
Data Point

0.7 RMSE
300
200 Actual
Value

100 Forecast
0
1 2 3 4 5 6 7 8 9 101112
Data Point

Here, error is less with damping value 0.3, hence we chose that. Also, for Jan the inventory forecast
henceforth will be 144.6993.
 II
months Restaura RMSE RMSE
nt 0.5 0.5 0.7 0.7
Januar
203
y #N/A #N/A #N/A #N/A
Februa
238
ry 203 #N/A 203 #N/A
march 247 220.5 #N/A 227.5 #N/A
April 193 233.75 #N/A 241.15 #N/A
213.37 34.582 207.44 36.164
may 193
5 33 5 77
203.18 30.429 197.33 31.130
June 149
75 99 35 53
176.09 40.873 163.50 40.262
July 157
38 74 01 5
166.54 35.194 29.365
Aug 161
69 68 158.95 72
163.77 33.324 160.38 28.181
Sept 122
34 79 5 44
142.88 26.710 133.51 22.508
Oct 130
67 54 55 23
136.44 25.441 131.05 22.285
Nov 167
34 8 47 79
151.72 30.793 156.21 30.429
Dec 240
17 92 64 35
257.35 240.32
   
18 83
 0.5 rmse restaurant 2
300
250
200
Actual
Value

150
100 Forecast
50
0
1 2 3 4 5 6 7 8 9 10 11 12
Data Point

0.7 rmse restaurant 2

300
200
Actual
Value

100 Forecast

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

Here, error is less with damping value 0.3, hence we chose that. Also, for Jan the inventory forecast
henceforth will be 156.2164.

III
months Restaura RMSE RMSE
nt 0.5 0.5 0.7 0.7
Januar
202
y #N/A #N/A #N/A #N/A
Februa
255
ry 202 #N/A 202 #N/A
march 265 228.5 #N/A 239.1 #N/A
April 205 246.75 #N/A 257.23 #N/A
225.87 44.288 220.66 45.489
may 210
5 12 9 13
217.93 33.303 213.20 34.217
June 160
75 29 07 98
188.96 42.236 175.96 43.482
July 166
88 76 02 24
177.48 37.131 168.98 31.850
Aug 174
44 9 81 42
175.74 36.039 172.49 31.382
Sept 126
22 14 64 8
 150.87 31.696 139.94 27.605
Oct 148
11 42 89 81
149.43 28.836 145.58 27.397
Nov 173
55 72 47 42
161.21 31.821 164.77 31.508
Dec 245
78 44 54 39
285.35 272.93
   
38 42

0.5 rmse restaurant 3

300
200 Actual
Value

100 Forecast
0
1 2 3 4 5 6 7 8 9 10 11 12
Data Point

0.7 rmse restaurant 3

300
200
Actual
Value

100 Forecast

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

Here, error is less with damping value 0.3, hence we chose that. Also, for Jan the inventory forecast
henceforth will be 164.7754.

Steps:

Go to data -> Data Analysis -> Exponential smoothing -> Select input and output range -> add
damping factor which is 1- alpha -> select chart output and standard errors option.

1.4) What are smooth series and how are these series different from other Time Series.

Smooth series are small data sets with no component of time series and henceforth does not have
cyclicity. It is hence generally used for univariate data where the forecast is weighted linear sum of
recent past observations. The value of this weight decreases exponentially hence it is also called
smoothing method, meaning, more recent values from the past carry higher weight and relevance.
In time series, an independent variable time is taken into consideration and the relationship of the same
with a second variable is noted in a particular frame to make forecast. Hence, as opposed to smooth
series, time series is a bivariate observation.

1.5) What is the other forecasting method available for smooth series other than Exponential
Smoothing method?
Moving average is the other forecasting method available for smooth series other than exponential
smoothing method.