Enterprise

Information System
Demand Aggregate
Forecasts Planning

Forecasting Master
FAS Production RCCP
Schedule

Inventory &
Material Req. CRP
Judi Prajetno Sugiono
Planning
jpsugiono@bigfoot.com
© 2005 Detail Capacity
Scheduling Control
 What is Forecasting?

 Process of predicting a
Sales will
future event be $200
 Underlying basis of Million!
all business decisions
 Production
 Inventory
 Personnel
 Facilities
Forecast Horizon

Job
scheduling, Sales &
worker production
assignments planning,
budgeting New product
planning,
Short term facility location

Medium term
Long Term

3month 1yr 3yr

Types of Forecasts

 Economic forecasts
 Address business cycle, e.g., inflation rate, money
supply etc.
 Technological forecasts
 Predict rate of technological progress
 Predict acceptance of new product
 Demand forecasts
 Predict sales of existing product
Demand Forecast?
Independent Demand:
Finished Goods
Product Structure

Dependent Demand:
Raw Materials,
Component parts,
Sub-assemblies, etc.
B(4) C(2)

D(2) E(1) D(3) F(2)

Example:

Error=Actual-Forecast
Demand for product or service

Actual ?
demand line

Average demand
over four years

Year Year Year Year Year

1 2 3 4 5
Realities of Forecasting

 Forecasts are seldom perfect

 Most forecasting methods assume that there
is some underlying stability in the system
 Both product family and aggregated product
forecasts are more accurate than individual
product forecasts
Forecasting Approach

 Naïve Approach
 Qualitative Approach
 Quantitative Approach
Naive Approach

 Assumes demand in
next period is the
same as demand in
most recent period
 e.g., If May sales were
48, then June sales will
be 48
 Sometimes cost
effective & efficient

© 1995 Corel Corp.

Forecasting Approaches
Qualitative Methods
 Used when situation is
vague & little data exist
 New products
 New technology
 Involves intuition,
experience
 e.g., forecasting sales on
Internet
Quantitative Methods
 Used when situation is
‘stable’ & historical data
exist
 Existing products
 Current technology
 Involves mathematical
techniques
 e.g., forecasting sales of
color televisions
 Qualitative Forecasting Methods

Executive Judgment Grass Roots

Historical analogy Qualitative Market Research

Methods

Delphi Method Panel Consensus

Quantitative Forecasting Methods

Quantitative
Forecasting

Time Series Associative

Models Models

Moving Exponential Trend Linear

Average Smoothing Projection Regression
What is a Time Series?

 Set of evenly spaced numerical data

 Obtained by observing response variable at
regular time periods
 Forecast based only on past values
 Assumes that factors influencing past and present
will continue influence in future
 Example
 Year: 1998 1999 2000 2001 2002
 Sales: 78.7 63.5 89.7 93.2 92.1
Forms of Forecast Movement

Demand
Demand

Random
movement

Time Time
(a) Trend (b) Cycle

Demand
Demand

Time Time
(c) Seasonal pattern (d) Trend with seasonal pattern
Trend Component

 Persistent, overall upward or downward

pattern
 Due to population, technology etc.
 Several years duration

Response

Mo., Qtr., Yr. © 1984-1994 T/Maker Co.

Seasonal Component

 Regular pattern of up & down fluctuations

 Due to weather, customs etc.
 Occurs within 1 year

Summer
Response
© 1984-1994 T/Maker Co.

Mo., Qtr.
Common Seasonal Patterns

Period of Pattern “Season” Length Number of

“Seasons” in
Pattern
Week Day 7
Month Week 4–4½
Month Day 28 – 31
Year Quarter 4
Year Month 12
Year Week 52
Cyclical Component

 Repeating up & down movements

 Due to interactions of factors influencing
economy
 Usually 2-10 years duration

Cycle
Response


Mo., Qtr., Yr.
Random Component

 Erratic, unsystematic, ‘residual’ fluctuations

 Due to random variation or unforeseen
events © 1984-1994 T/Maker Co.

 Union strike
 Tornado
 Short duration &
nonrepeating
General Time Series Models

 Any observed value in a time series is the

product (or sum) of time series components
 Multiplicative model
 Yi = Ti · Si · Ci · Ri (if quarterly or mo. data)
 Additive model
 Yi = Ti + Si + Ci + Ri (if quarterly or mo. data)
Time Series Forecasting Process
1. Identify the 2. Collect historical 3. Plot data and
purpose of forecast data identify patterns

4. Select a forecast model

6. Check forecast accuracy 5. Develop/compute forecast
that seems appropriate
with one or more measures for period of historical data
for data

7.
Is accuracy 8b. Select new forecast
of forecast model or adjust parameters
acceptable? of existing model

9. Adjust forecast based

8a. Forecast over 10. Monitor results and
on additional qualitative
planning horizon measure forecast accuracy
information and insight
Forecast Accuracy
Deviation / error
et  At  Ft
Mean Forecast Deviation

MFD= 
 At  Ft 
n
Mean Absolute Deviation

MAD= 
 At  Ft 
n
Mean Square Deviation
 At  Ft 
2

MSD= 
n
Mean Absolute Percentage Deviation
 100  Ft
MAPD=   t
A 
 n  At
Example:
A F A-F |(A-F)| (A-F)2 (A-F/A)100 | (A-F/A)100 |
120 125 -5 5 25 -4.17 4.17
130 125 +5 5 25 3.85 3.85
110 125 -15 15 225 -13.64 13.64
140 125 +15 15 225 10.71 10.71
110 125 -15 15 225 -13.64 13.64
130 125 +5 5 25 3.85 3.85
TOTAL -10 60 750 49.86
MFD=-10/6=-1.67
MAD=60/6=10
MSD=750/6=125
MAPD=49.86/6=8.31%
Moving Average Method

 MA is a series of arithmetic means

 Used if little or no trend
 Used often for smoothing
 Provides overall impression of data over time
 Equation

MA   Demand in Previous n Periods

n
Example 1:
You’re manager of a museum store that
sells historical replicas. You want to forecast
sales (000) for 2003 using a 3-period
moving average.
1998 4
1999 6
2000 5
2001 3
2002 7

© 1995 Corel Corp.

Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3 = 5
2002 7
2003 NA
Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3 = 5
2002 7 6+5+3=14 14/3=4 2/3
2003 NA
Moving Average Solution
Time Response Moving Moving
Yi Total Average
(n=3) (n=3)
1998 4 NA NA
1999 6 NA NA
2000 5 NA NA
2001 3 4+6+5=15 15/3=5.0
2002 7 6+5+3=14 14/3=4.7
2003 NA 5+3+7=15 15/3=5.0
Moving Average Graph

Sales
8 Actual
6
Forecast
4
2
95 96 97 98 99 00
Year
Example 2:
W eek D emand  Question: What are the
1 650 3-week and 6-week
2 678 moving average
3 720
forecasts for demand?
4 785
5 859  Assume you only have
6 920 3 weeks and 6 weeks
7 850 of actual demand data
8 758
for the respective
9 892
10 920
forecasts
11 789
12 844
Week Demand 3-Week 6-Week
1 650 F4=(650+678+720)/3
2 678
=682.67
3 720 F7=(650+678+720
4 785 682.67 +785+859+920)/6
5 859 727.67
=768.67
6 920 788.00
7 850 854.67 768.67
8 758 876.33 802.00
9 892 842.67 815.33
10 920 833.33 844.00
11 789 856.67 866.50
12 844 867.00 854.83
 Plotting the moving averages and comparing them
shows how the lines smooth out to reveal the overall
upward trend in this example.

1000
900
Demand
Demand

800
3-Week
700
6-Week
600
500
1 2 3 4 5 6 7 8 9 10 11 12
Week
Example 3:

Week Demand  Question: What is the 3

1 820 week moving average
2 775 forecast for this data?
3 680  Assume you only have
4 655 3 weeks and 5 weeks
5 620 of actual demand data
6 600 for the respective
7 575 forecasts
Week Demand 3-Week 5-Week
1 820
2 775
3 680
4 655 758.33
5 620 703.33
6 600 651.67 710.00
7 575 625.00 666.00
Weighted Moving Average Method

 Used when trend is present

 Older data usually less important
 Weights based on intuition
 Often lay between 0 & 1, & sum to 1.0
 Equation
Σ(Weight for period n) (Demand in period n)
WMA =
ΣWeights
Example 1:

Question: Given the weekly demand and weights, what is

the forecast for the 4th period or Week 4?

Week Demand Weights:

1 650
2 678 t-1 .5
3 720 t-2 .3
4 t-3 .2

Note that the weights place more emphasis on the

most recent data, that is time period “t-1”.
 Week Demand Forecast
1 650
2 678
3 720
4 693.4
(0.5)(720)+(0.3)(678)+(0.2)(650)
F4 = =693.4
(0.5)+(0.3)+(0.2)
Example 2:

Question: Given the weekly demand information and

weights, what is the weighted moving average
forecast of the 5th period or week?

Week Demand Weights:

1 820 t-1 .7
2 775 t-2 .2
3 680
t-3 .1
4 655
 Week Demand Forecast
1 820
2 775
3 680
4 655
5 672
(0.1)(755)+(0.2)(680)+(0.7)(655)
F5 = = 672
(0.1)+(0.2)+(0.7)
Actual Demand, MA, and WMA

35 Weighted moving average

30
Actual sales
25
Sales Demand

20
15
10
Moving average
5
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
Disadvantages of Moving Average Methods

 Increasing n makes forecast less sensitive to

changes
 Do not forecast trend well
 Require much historical
 data
Exponential Smoothing Method

 Form of weighted moving average

 Weights decline exponentially
 Most recent data weighted most
 Requires smoothing constant ()
 Ranges from 0 to 1
 Subjectively chosen
 Involves little record keeping of past data
Exponential Smoothing Equations

 Ft = At - 1 + (1-)At - 2 + (1- )2·At - 3

+ (1- )3At - 4 + ... + (1- )t-1·A0
 Ft = Forecast value
 At = Actual value
  = Smoothing constant
 Ft = Ft-1 + (At-1 - Ft-1)
 Use for computing forecast
α

 Ft = Ft-1 + (At-1 - Ft-1)

 0≤α≤1
 α=0 Forecast does not reflect recent data
 α=1 Forecast based only on most recent
data
Exponential Smoothing Example
During the past 8 quarters, the Port of Baltimore has unloaded large
quantities of grain. ( = .10). The first quarter forecast was 175..
Quarter Actual
1 180
2 168
Find the forecast
3 159
for the 9th quarter.
4 175
5 190
6 205
7 180
8 182
9 ?
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 +
3 159
4 175
5 190
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(
3 159
4 175
5 190
6 205
 Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, Ft
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 -
3 159
4 175
5 190
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, Ft
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 - 175.00)
3 159
4 175
5 190
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, Ft
Quarter Actual
(α= .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 - 175.00) = 175.50
3 159
4 175
5 190
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 - 175.00) = 175.50
3 159 175.50 + .10(168 - 175.50) = 174.75
4 175
5 190
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1995 180 175.00 (Given)
1996 168 175.00 + .10(180 - 175.00) = 175.50
1997 159 175.50 + .10(168 - 175.50) = 174.75
1998 175 174.75 + .10(159 - 174.75)= 173.18
1999 190
2000 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 - 175.00) = 175.50
3 159 175.50 + .10(168 - 175.50) = 174.75
4 175 174.75 + .10(159 - 174.75) = 173.18
5 190 173.18 + .10(175 - 173.18) = 173.36
6 205
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Quarter Actual
(α = .10)
1 180 175.00 (Given)
2 168 175.00 + .10(180 - 175.00) = 175.50
3 159 175.50 + .10(168 - 175.50) = 174.75
4 175 174.75 + .10(159 - 174.75) = 173.18
5 190 173.18 + .10(175 - 173.18) = 173.36
6 205 173.36 + .10(190 - 173.36) = 175.02
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Time Actual
(α = .10)
4 175 174.75 + .10(159 - 174.75) = 173.18
5 190 173.18 + .10(175 - 173.18) = 173.36
6 205 173.36 + .10(190 - 173.36) = 175.02
7 180 175.02 + .10(205 - 175.02) = 178.02
8
9
Exponential Smoothing Solution
Ft = Ft-1 + 0.1(At-1 - Ft-1)
Forecast, F t
Time Actual
(α = .10)
4 175 174.75 + .10(159 - 174.75) = 173.18
5 190 173.18 + .10(175 - 173.18) = 173.36
6 205 173.36 + .10(190 - 173.36) = 175.02
7 180 175.02 + .10(205 - 175.02) = 178.02
8 182 178.02 + .10(180 - 178.02) = 178.22
9 ? 178.22 + .10(182 - 178.22) = 178.58
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- )At - 2 + (1- )2At - 3 + ...

Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10 10%
= 0.90
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- ) At - 2 + (1- )2At - 3 + ...

Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10 10% 9%
= 0.90
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- )At - 2 + (1- )2At - 3 + ...

Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10 10% 9% 8.1%

= 0.90
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- )At - 2 + (1- )2At - 3 + ...

Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10 10% 9% 8.1%

= 0.90 90%
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- ) At - 2 + (1- )2At - 3 + ...

Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10 10% 9% 8.1%

= 0.90 90% 9%
Forecast Effects of
Smoothing Constant 
Ft =  At - 1 + (1- ) At - 2 + (1- )2At - 3 + ...
Weights
= Prior Period 2 periods ago 3 periods ago
 (1 - ) (1 - )2

= 0.10
10% 9% 8.1%
= 0.90
90% 9% 0.9%
Impact of 

250

200 Forecast (0.5)

A c tu a l T o n a g e

150 Forecast (0.1)

Actual

100

50

0
1 2 3 4 5 6 7 8 9
Quarter
Choosing 

Seek to minimize the Mean Absolute Deviation (MAD)

If: Forecast error = demand - forecast

 forecast errors
Then: MAD 
n
Exponential Smoothing with Trend Adjustment

 Forecast including trend (FITt) =

exponentially smoothed forecast (Ft) +
exponentially smoothed trend (Tt)
FITt = Ft + Tt

 Ft = Last period’s forecast +

α (Last period’s actual – Last period’s forecast)
Ft = Ft-1 +  (At-1 – Ft-1)
 Tt = β(Forecast this period – Forecast last period) +
(1- β)(Trend estimate last period)
Tt = (Ft - Ft-1) + (1- )Tt-1
 Ft = exponentially smoothed forecast of the
data series in period t
 Tt = exponentially smoothed trend in period t
 At = actual demand in period t
  = smoothing constant for the average
  = smoothing constant for the trend
Example
PERIOD MONTH DEMAND
Assume for :
1 Jan 37 =0.5
2 Feb 40 β=0.3
3 Mar 41
4 Apr 37
5 May 45
6 Jun 50
7 Jul 43
8 Aug 47
9 Sep 56
10 Oct 52
11 Nov 55
12 Dec 54
 Ft = Ft-1 +  (At-1 – Ft-1) Tt = (Ft - Ft-1) + (1- )Tt-1

ACTUAL FORECAST TREND FORECAST

PERIOD MONTH DEMAND Ft +1 Tt +1 INC. TREND FITt +1

1 Jan 37 37.00 – –
2 Feb 40 37.00 0.00 37.00
3 Mar 41 38.50 0.45 38.95
4 Apr 37 39.75 0.69 40.44
5 May 45 38.37 0.07 38.44
6 Jun 50 38.37 0.07 38.44
7 Jul 43 45.84 1.97 47.82
8 Aug 47 44.42 0.95 45.37
9 Sep 56 45.71 1.05 46.76
10 Oct 52 50.85 2.28 58.13
11 Nov 55 51.42 1.76 53.19
12 Dec 54 53.21 1.77 54.98
13 Jan – 53.61 1.36 54.96
 70 –
Adjusted forecast ( = 0.30)
60 –
Actual
50 –
Demand

40 –

30 – Forecast ( = 0.50)

20 –

10 –

0– | | | | | | | | | | | | |
1 2 3 4 5 6 7 8 9 10 11 12 13
Period
 Simple Linear Regression Model
The simple linear regression Y
model seeks to fit a line
through various data over time.
a
0 1 2 3 4 5 x (Time)

Ŷ = a + bx Is the linear regression model.

Ŷ is the regressed forecast value or dependent variable in

the model, a is the intercept value of the the regression
line, and b is similar to the slope of the regression line.
However, since it is calculated with the variability of the
data in mind, its formulation is not as straight forward as
our usual notion of slope.
Regression Equations:
y  a  bx

a  y  bx

b
 xy - n( y )( x )
 x - n( x )
2 2

atau

 ( x  x)( y  y)
b
 x  x ) 2
 Example:
Question: Given the data below, what is the simple linear
regression model that can be used to predict sales?

W eek Sales
1 150
2 157
3 162
4 166
5 177
 73
Answer: First, using the linear regression formulas, we can
compute “a” and “b”.

Week Week*Week Sales Week*Sales

1 1 150 150
2 4 157 314
3 9 162 486
4 16 166 664
5 25 177 885
3 55 162.4 2499
Average Sum Average Sum

b=
 xy - n( y)(x) 2499 - 5(162.4)(3) 63
=  = 6.3
 x - n(x )
2 2
55  5(9 ) 10

a = y - bx = 162.4 - (6.3)(3) = 143.5

The resulting regression model is:
Ŷ = 143.5 + 6.3x
Now if we plot the regression generated forecasts against the
actual sales we obtain the following chart:
180
175
170
165
160 Sales
Sales

155 Forecast
150
145
140
135
1 2 3 4 5
Perio
d
Seasonal Adjustments

 Repetitive increase/
decrease in demand
 Use seasonal factor
to adjust forecast
Seasonal Adjustments

 Repetitive increase/
decrease in demand
 Use seasonal factor
to adjust forecast
Di
Seasonal factor = Si =
D
Seasonal Adjustment

DEMAND (1000’S PER QUARTER)

YEAR 1 2 3 4 Total
1999 12.6 8.6 6.3 17.5 45.0
2000 14.1 10.3 7.5 18.2 50.1
2001 15.3 10.6 8.1 19.6 53.6
Total 42.0 29.5 21.9 55.3 148.7
Seasonal Adjustment

DEMAND (1000’S PER QUARTER)

YEAR 1 2 3 4 Total
1999 12.6 8.6 6.3 17.5 45.0
2000 14.1 10.3 7.5 18.2 50.1
2001 15.3 10.6 8.1 19.6 53.6
Total 42.0 29.5 21.9 55.3 148.7

D1 42.0 D3 21.9
S1 = = = 0.28 S3 = = = 0.15
D 148.7 D 148.7
D2 29.5 D4 55.3
S2 = = = 0.20 S4 = = = 0.37
D 148.7 D 148.7
Seasonal Adjustment

DEMAND (1000’S PER QUARTER)

YEAR 1 2 3 4 Total
1999 12.6 8.6 6.3 17.5 45.0
2000 14.1 10.3 7.5 18.2 50.1
2001 15.3 10.6 8.1 19.6 53.6
Total 42.0 29.5 21.9 55.3 148.7
Si 0.28 0.20 0.15 0.37
Seasonal Adjustment

DEMAND (1000’S PER QUARTER)

YEAR 1 2 3 4 Total
For 2002
1999 12.6 8.6 6.3 17.5 45.0
2000 14.1 10.3 7.5 18.2 50.1 y = 40.97 + 4.30x
2001 15.3 10.6 8.1 19.6 53.6 = 40.97 + 4.30(4)
Total 42.0 29.5 21.9 55.3 148.7 = 58.17
Si 0.28 0.20 0.15 0.37
Seasonal Adjustment
DEMAND (1000’S PER QUARTER)
YEAR 1 2 3 4 Total
For 2002
1999 12.6 8.6 6.3 17.5 45.0
2000 14.1 10.3 7.5 18.2 50.1 y = 40.97 + 4.30x
2001 15.3 10.6 8.1 19.6 53.6 = 40.97 + 4.30(4)
Total 42.0 29.5 21.9 55.3 148.7 = 58.17
Si 0.28 0.20 0.15 0.37

SF1 = (S1) (F5) SF3 = (S3) (F5)

= (0.28)(58.17) = 16.28 = (0.15)(58.17) = 8.73

SF2 = (S2) (F5) SF4 = (S4) (F5)

= (0.20)(58.17) = 11.63 = (0.37)(58.17) = 21.53
Forecast Control

 Reasons for out-of-control forecasts

 Change in trend
 Appearance of cycle
 Weather changes
 Promotions
 Competition
 Politics
Tracking Signal

 Compute each period

 Compare to control limits
 Forecast is in control if within limits

(Dt - Ft) E
Tracking signal = =
MAD MAD

Use control limits of +/- 2 to +/- 5 MAD

Tracking Signal Values
DEMAND FORECAST, ERROR E =
PERIOD Dt Ft Dt - Ft (Dt - Ft) MAD

1 37 37.00 – – –
2 40 37.00 3.00 3.00 3.00
3 41 37.90 3.10 6.10 3.05
4 37 38.83 -1.83 4.27 2.64
5 45 38.28 6.72 10.99 3.66
6 50 40.29 9.69 20.68 4.87
7 43 43.20 -0.20 20.48 4.09
8 47 43.14 3.86 24.34 4.06
9 56 44.30 11.70 36.04 5.01
10 52 47.81 4.19 40.23 4.92
11 55 49.06 5.94 46.17 5.02
12 54 50.84 3.15 49.32 4.85
Tracking Signal Values
DEMAND FORECAST, ERROR E =
PERIOD Dt Ft Dt - Ft (Dt - Ft) MAD

1 37 37.00 – – –
2 40 37.00 3.00 3.00 3.00
3 41 37.90 3.10 6.10 3.05
4 37 38.83 -1.83 4.27 2.64
5 45 38.28
Tracking 6.72 for period
signal 10.99 3 3.66
6 50 40.29 9.69 20.68 4.87
7 43 43.20 -0.20
6.10 20.48 4.09
8 47 TS3 = 3.86 =24.34
43.14 2.00 4.06
9 56 44.30 3.05 36.04
11.70 5.01
10 52 47.81 4.19 40.23 4.92
11 55 49.06 5.94 46.17 5.02
12 54 50.84 3.15 49.32 4.85
Tracking Signal Values
DEMAND FORECAST, ERROR E = TRACKING
PERIOD Dt Ft Dt - Ft (Dt - Ft) MAD SIGNAL

1 37 37.00 – – – –
2 40 37.00 3.00 3.00 3.00 1.00
3 41 37.90 3.10 6.10 3.05 2.00
4 37 38.83 -1.83 4.27 2.64 1.62
5 45 38.28 6.72 10.99 3.66 3.00
6 50 40.29 9.69 20.68 4.87 4.25
7 43 43.20 -0.20 20.48 4.09 5.01
8 47 43.14 3.86 24.34 4.06 6.00
9 56 44.30 11.70 36.04 5.01 7.19
10 52 47.81 4.19 40.23 4.92 8.18
11 55 49.06 5.94 46.17 5.02 9.20
12 54 50.84 3.15 49.32 4.85 10.17
Tracking Signal Plot

3 –
Tracking signal (MAD)

2 –

1 –

0 –

-1 –

-2 –

-3 –
| | | | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10 11 12
Period
Tracking Signal Plot

3 –
Tracking signal (MAD)

2 –
Exponential smoothing ( = 0.30)
1 –

0 –

-1 –

-2 –

-3 –
| | | | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10 11 12
Period
Tracking Signal Plot

3 –
Tracking signal (MAD)

2 –
Exponential smoothing ( = 0.30)
1 –

0 –

-1 –

-2 – Linear trend line

-3 –
| | | | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10 11 12
Period
Statistical Control Charts

(Dt - Ft)2
= n-1

 Using  we can calculate statistical

control limits for the forecast error
 Control limits are typically set at  3
Statistical Control Charts

18.39 –

12.24 –

6.12 –
Errors

0–

-6.12 –

-12.24 –

-18.39 –

| | | | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10 11 12
Period
Statistical Control Charts

18.39 –
UCL = +3
12.24 –

6.12 –
Errors

0–

-6.12 –

-12.24 –
LCL = -3
-18.39 –

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