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Self Study Questions (Forecasting)

1. The demand for a certain product in a retailer has been increasing. For the past six days, the
following demand has been observed:

t Day Demand, units ( At )

1 Monday 15
2 Tuesday 18
3 Wednesday 22
4 Thursday 23
5 Friday 27
6 Saturday 26

Make the following forecasts:

a) Use a three-day moving average to make forecasts from Thursday to Sunday. Calculate
Cumulative Forecast Error (CFE), Mean Absolute Deviation (MAD), Mean Square Error
(MSE), Mean Absolute Percentage Error (MAPE) for your forecasts from Thursday to
Saturday.

b) Use Simple Exponential Smoothing with α =0.1 to make forecasts from Thursday to
Sunday. Calculate CFE, MAD, MSE, MAPE for your forecasts from Thursday to Saturday.

c) Use Simple Exponential Smoothing with Trend Adjustment (Holt’s Model) and α =0.1
and β=0.2 to make forecasts from Thursday to next Wednesday. Calculate CFE, MAD,
MSE, MAPE for your forecasts from Thursday to Saturday.

d) For Holt’s Model, use Excel solver and find α and β that minimizes MAD. Compare the
new MAD value with the one you found in part c. Which one would you prefer? Why?

e) Which forecasting model (three-day moving average (part a), Simple Exponential
Smoothing with α =0.1 (part b), Holt’s Model with α =0.1 and β=0.2 (part c), or Holt’s
Model with optimized α and β (part d)) provides the best forecasts? Justify your answer.
 2. The monthly demand data of a product is given below:

Month Month No Demand Units

Jan, 2015 1 240
Feb 2 286
Mar 3 314
Apr 4 324
May 5 307
Jun 6 357
Jul 7 390
Aug 8 401
Sept 9 437
Oct 10 473
Nov 11 517
Dec 12 550
Jan, 2016 13 598
Feb 14 626
Mar 15 676
Apr 16 695
May 17 741
Jun 18 794

Develop a linear regression model (Y =mX +b ) for the given monthly demand data where

X =MonthNoand Y =DemandUnits
a) Using the formulations, find m and b .Find r 2 and comment on the performance of your
linear regression model.

b) Validate the answers you found in part a) using Data Analysis (Regression) ToolPak of
Excel.

c) Make forecasts for the next 6 months using the linear regression model that you
developed.

Cevaplar:
1.a)

CFE 13.00
MAD 4.33
MSE 21.67
MAPE 17.22

1.b)

CFE 25.00
MAD 8.33
MSE 71.00
MAPE 32.75

1.c)

CFE 24
MAD 8
MSE 66
MAPE 31.46

1.d)

0.6659 0.54783
alpha
9 beta 9
These alpha and beta values result in a MAD value of 1.33. Compare it (MAD=1.33) with the value
you obtained in part c (MAD=8). Explain which one would you prefer and the reason.

2.a)

n m b r
31.7956656
18 3 182.719 0.988888861
r^2= 0.977901179

2.c)

July,
2016 19 786.8
Aug 20 818.6
Sept 21 850.4
Oct 22 882.2
Nov 23 914.0
Dec 24 945.8