Implementation of Time Series Forecasting with Box

Jenkins ARIMA method on Wood Production of

Indonesian Forests
Khairul Huda1,a), Catur Edi Wibowo2,b), Vincencius Gunawan3,b)
Author Affiliations
1
Magister Program of Information System, School of Postgraduate Studies,
Diponegoro University,Semarang, Indonesia
2
Departement of Physics, Faculty of Science and Mathematics, Diponegoro University, Semarang, Indonesia

Author Emails
a)
Corresponding author: duasatu.kh@gmail.com
b)
catur.ediwidodo@gmail.com
c)
goenangie@gmail.com

Abstract. Since the 1950s, Southeast Asia's vast tropical forests have continued to decline due to increased demand for
wood by Japan, the United States, Europe, and China. Based on these problems, the ARIMA Box Jenkins method is used
to predict future Indonesian forest timber products as an effort to create healthy plantation forests while anticipating a
decline in export activities in the wood processing industry. The Box-Jenkins (ARIMA) method is one of the time series
forecasting models that has the advantage that it is easy to implement on all data patterns including trend or seasonal data
patterns for short-term forecasting with good accuracy values to realize the creation of healthy forest plant products. This
research uses annual wood production dataset sourced from the Central Bureau of Statistics of the Republic of Indonesia
in 2000-2009. The results of forecasting using the ARIMA method with the best 2 types of ARIMA models, namely 1,2,0
and 0,2,1 for the production dataset of logs, saw wood and plywood where the significant value reaches 95% the results
2
are for the next 10 years of wood production. Most are round wood with a forecast value of 57,208,981 M , saw wood
2 2
24,824,675 M and plywood, 5,200,067 M .

INTRODUCTION
The creative economy that has begun to grow among home decor activists is seen to be utilizing forest
products and is not only used by large companies but also micro, small and medium enterprises. The raw
forest products are reprocessed by creative hands into useful and valuable goods. Indonesia's forest
monitoring results in 2020 show that the total forest land area of Indonesia's landmass is 95.6 million ha.
These figures have shown how Indonesia's forest products are abundant and become a natural resource that
can be renewed and conserved by type.
This condition becomes sad when considering the fact that forest products exported from Indonesia cannot
meet international demand due to various local problems. Indonesia was once a world leader in the production
of logs and plywood, but today the logging and woodworking sectors are experiencing a sharp decline. Since
the 1950s, the vast tropical forests of Southeast Asia have been continuously depleted by increasing demand
for timber by Japan, the United States, Europe, and China [1]. Therefore, healthy plantation forests are very
important for the future of the wood processing industry in Indonesia [2].
Plantation expansion has the potential to create carbon stocks, a sustainable supply of timber, employment
for local communities, and to reduce logging pressures [3]. Based on these problems, a method is needed that
can forecast future Indonesian forest wood products as an effort to create healthy plantation forests while
anticipating a decline in export activities in the wood processing industry so that it is hoped that in the future
Indonesia will be able to lead the world in production. forestwood. Time series forecasting is a technique for
forecasting data related to time. Time series forecasting predicts future data points based on observed data
over a period known as lead time.
The purpose of data point forecasting is to provide a basis for economic planning, production planning,
production control and optimization of industrial processes [4]. This method predicts time series data based
on statistical theory to find trends in the data series and then predicts them into the future. The Box-Jenkins
(ARIMA) method is one of the time series forecasting models which has the advantage that it is easy to
implement on all data patterns including trend or seasonal data patterns for short-term forecasting with good
accuracy values to realize the creation of healthy forest plant products [5].
 Research purposes forecasting time series using the Box-Jenkins (ARIMA) method to identify trend
patterns that will appear in the future by observing data patterns in the previous period. Provide predictive
information on trends from future data patterns as a basis for production planning and production control so
that they can support the growth of healthy forests in the Indonesian Forest area.

LITERATURE REVIEW
Research on time series using the Box Jenkins (ARIMA) method has previously been carried out to resolve
financial cases, namely forecasting the Naira/USD exchange rate during the 1960-2017 period. Based on the
minimum AIC value, this study presents the ARIMA (1, 1, 1) model as the optimal model[6]. Research on
time series using the Box Jenkins (ARIMA) method has previously been used to forecast sales of plastic
production in 2015. Based on the MAPE (Mean Absolute Percentage Error) value, the ARIMA value (3, 0, 2)
in sales data for plastic products from 2012 to with 2014 producing a prediction accuracy rate of 74% for PP
Trilene products and 68% for PP Tintapro products[7]. Research on forest wood production has been carried
out previously using the Structural Equation Modeling method to test whether forest wood production is
positively related to tree species richness by controlling for climatic factors analyzing 55265 forest inventory
plots in 11 forest types in five European countries. Based on the analysis found a positive local-scale
relationship between tree species richness and forest wood production occurring across continents which
supports the incorporation of the role of biodiversity in management plans and policies for forest carbon
sequestration[8]. Research on the export of wood products has also been carried out in Ghana from 1997-2013.
This study uses the Box-Jenkins methodology in building the ARIMA (Autoregressive Integrated Moving
Average) model. Monthly time series data on wood product exports from 1997-2013 are drawn from monthly
and annual reports on wood product exports published by the Timber Industry Development Division (TIDD)
of the Ghana Forestry Commission. The model will guide TIDD in their annual timber export planning and
also help avoid the financial losses that can result from poor decision making and ultimately improve the
efficiency of their operations[9].

THEORETICAL REVIEW

Time series is an important class of temporal data objects, collections of observations made chronologically.
In time series research, it focuses on the order of the observed data and is usually ordered by time [10]. Time
Series is the most popular research topic in science and engineering domains. The main purpose of analysis
using time series is to develop a mathematical model that can predict future observations based on available
data [11]. Several widely recognized statistical forecasting models for predicting future observations of time
series based on some linear function of past values and white noise terms (1, 12) namely random walk,
autoregressive (AR), moving average (MA), and ARIMA. In addition, there are also various nonlinear models
that have been developed in the literature, one of the popular ones is ANN which has many prominent features
(1, 13, 14). There is also Zhang who rationally combines ARIMA and ANN models to significantly improve
forecasting accuracy [12].
Box Jenkins Method an approach that combines many elements of the theory becomes a reality with the
work of Box and Jenkins (1976), Brockwell and Davis (1996) etc. This method provides a systematic
procedure for time series analysis that is general enough to handle all empirically observed time series data
patterns [13]. The ARIMA forecasting model is often referred to as the Box-Jenkins Methodology. ARIMA
model is a class of linear models capable of representing stationary (without a trend) and non-stationary (with
a trend) time series. The basis of the Box-Jenkins approach to modeling consists of four phases: Identification,
Estimation, Diagnostic Examination and Application. The modeling strategy is illustrated below:
 Box-Jenkins Model Schematic

In the ARIMA model (p, d, q), p is the degree of the Autoregressive (AR) model, q is the degree of the
moving average (MA) model and d represents how many differences are needed to create the Stationery
series. The ARIMA model becomes AR (p), MA (q) or ARMA (p, q) if the time series is stationary [14].

Step 1: The ARMA model (p, q) is shown in equation 2.1 below [15]
𝑝 𝑞
𝑌𝑡 = ∑𝑖=1 𝑎𝑖 𝑌𝑡−𝑖 + ∑𝑖 𝛽𝑖 𝜀𝑡−1 + + 𝜀𝑡 (1)

linear combination of previous observations in this equation is the regression coefficient.

Step 2: The first difference of the non-stationary time series Yt is obtained by the equation
∇1 𝑌𝑡 = 𝑌𝑡 − 𝑌𝑡−1 𝑌𝑡′ (2)

Step 3: If the Yt' series is not stationary, the process of taking the difference is repeated
for d times until it is stationary.
∇𝑑 𝑌𝑡 = ∇𝑑−1 𝑌𝑡 − ∇𝑑−1 𝑌𝑡−1 (3)

Step 4: The ARIMA model expression (p, d, q) can be defined as follows.

𝑌𝑡 = ∅1 𝑌𝑡−1 + ∅2 𝑌𝑡−2 + ⋯ + ∅𝑝 𝑌𝑡−𝑝 + 𝑎1 − ∅1 𝑎𝑡−1 − 𝑎2 − ∅2 𝑎𝑡−2 − ⋯ − 𝑎𝑞 − ∅𝑞 𝑎𝑡−𝑞 (4)

Evaluation of forecasting The accuracy of forecasts can only be determined by considering how well the
model performs on new unused data when fitting the model. The forecast error is on the same scale as the
data. A measure of accuracy based solely on 𝜀𝑡 , therefore, is scale dependent and cannot be used to make
comparisons between series involving different units. The two most commonly used scale dependent
measures are based on absolute error or squared error.

Mean absolute error : MAE =mean(|𝑒𝑡 |) (5)

Root Mean squared error : RMSE =√𝑚𝑒𝑎𝑛(𝑒𝑡2 ) (6)

 Comparing forecasting methods applied to one time series, or several time series with the same unit, MAE
is popular because it is easy to understand and calculate. Forecasting methods that minimize MAE will
produce median estimates, while minimizing RMSE will produce average estimates. As a result, RMSE is
also widely used, although it is more difficult to interpret [16].

RESULT REVIEW

In Arima's research, the first thing to do is to plot the data to find out whether the data is stationary or not,
then if the data is not stationary then do differentiation so that the data can produce an average or stationary
value, then determine the plot autocorrelation function (ACF) and partial autocorrelation function for
knowing the determination of the interim model for interpretation and testing. After that, perform diagnostics
to determine whether the model can be interpreted. If the model is suitable, then forecasting will be carried
out using this model. The following are the results of the best ACF and PACF models with P-Value <0.05.
The following are the results of experiments that have been carried out using the MINITAB Software.

Table 1. Results of model testing for round wood production

Model Parameter P-value Result MSE

1 ARIMA 1,2,1 AR 0,907 No Significant 1,7387

MA 0,012 Significant

2 ARIMA 1,2,0 AR 0,69 No Significant 2,7

3 ARIMA 0,2,1 MA 0,003 Significant 1,5

Table 2. Results of forecasting the production of round wood for the next 10 years with the ARIMA model

95% Limits

Period Forecast Lower Upper

1 34430597 -7533582 76394777

2 36961529 -25744097 99667154

3 39492460 -41475931 120460851

4 42023392 -56340818 140387602

5 44554323 -70917660 160026307

6 47085255 -85479955 179650464

7 49616186 -100175856 199408229

8 52147118 -115092272 219386508

9 54678049 -130282700 239638798

10 57208981 -145780975 260198936

 FIGURE 1. Times series plot for round wood

Table 3. Results of model testing for saw wood production

Model Parameter P-value Result MSE

1 ARIMA 1,2,1 AR 0,005 No Significant 8,044

MA 0,001 Significant

2 ARIMA 1,2,0 AR 0,001 Significant 2,371

3 ARIMA 0,2,1 MA 0,001 Significant 1,7619

Table 4. Results of forecasting the production of saw wood for the next 10 years with the ARIMA model
95% Limits

Period Forecast Lower Upper

1 3795229 -20234158 27824616

2 6131834 -26023268 38286936

3 8468439 -28730976 45667854

4 10805045 -29705794 51315883

5 13141650 -29521265 55804565

6 15478255 -28509974 59466483

7 17814860 -26904563 62534283

 8 20151465 -24891747 65194677

9 22488070 -22637707 67613847

10 24824675 -20301150 69950500

FIGURE 2. Times series plot for saw wood

Table 5. Results of model testing for ply wood production

Model Parameter P-value Result MSE

1 ARIMA AR 0,008 No Significant 9.084

1,2,1
MA 0 Significant

2 ARIMA AR 0,001 Significant 2,577

1,2,0
3 ARIMA MA 0 Significant 1,6153
0,2,1
4 ARIMA AR 0,011 Significant 2,841
1,1,1
MA 0 Significant

Table 6. Results of forecasting the production of ply wood for the next 10 years with the ARIMA model
 95% Limits

Period Forecast Lower Upper

1 3644634 -29358183 36647451

2 3883126 -50575076 58341328

3 4002714 -84079672 92085100

4 4204039 -117801613 126209691

5 4349176 -157917127 166615479

6 4532938 -199977432 209043308

7 4690148 -246269728 255650025

8 4865611 -294948299 304679521

9 5028526 -346882646 356939699

10 5200067 -401244424 411644558

FIGURE 3. Times series plot for plywood

 CONCLUSION

Forecasting used with ARIMA produces predictions of annual data for the next 10 years. years. The Arima
model used for the 3 types of wood produces:
1. based on arima experiments that have been carried out with several models, for round logs the best arima
model is 0.2,1 with a P-Value value of 0.003 meaning it is below the alpha value so it is significant and the
MSE value is 1.5
2. based on arima experiments that have been carried out with several models, the best arima model saw wood
is 0.2,1 with a P-Value value of 0.001 meaning it is below the alpha value so it is significant and the MSE
value is 1.7619
3. based on arima experiments that have been carried out with several models, the best arima saw wood model
is 1.2.0 with a P-Value value of 0.001 meaning it is below the alpha value so it is significant and the MSE
value is 2.577
4. In forecasting the results can be seen from the forecasting values in table 2,4,6 for the production of round
wood is 57.208.981 M2, saw wood is 24.824.675 M2, plywood 5.200.067 M2

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