Using Forecasting Techniques in Analytic Solver

Analytic Solver provides more powerful tools for forecasting that we studied in Chapter 9.
These can be found in the Data Mining tab within the Time Series group. Click on the
Smoothing icon as shown in Figure 1.

Figure 1 Analytic Solver Forecasting Options

Moving Average

The Moving Average tool provides moving average forecasts using the same approach
described in Chapter 9.

Example: Moving Average Forecasting with Analytic Solver

We will apply this tool to the Tablet Computer Sales data used in Chapter 9. First, click on any
value in the data. Then select Moving Average from the options in Figure 1. In the dialog,
shown in Figure 2, move the variable Week from the Variables in Input Data field to the Time
variable pane using the arrow button and the variable Units Sold to the Selected variable pane
as shown. In the Weights panel, adjust the value of Interval—the number of periods to use for
the moving average – in this case, 3. In the Output Options panel, you may check the box for
Produce Forecast and enter the number of forecasts to generate from the procedure. When
you click OK, Analytic Solver generates the output in a new workbook. Figure 3 shows the
results, which correspond to the results using Excel in Chapter 9. The forecast for week 18 is
also shown along with a confidence interval.

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Figure 2 Moving Average Dialog

Figure 3 Moving Average Results

Exponential Smoothing

The exponential smoothing tool computes exponential smoothing forecasts. This tool provides
options to forecast using a pre-determined smoothing constant, or to automatically find the
best value of the smoothing constant.

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Example: Optimizing Exponential Smoothing Forecasts Using Analytic Solver

Again, we will use the Tablet Computer Sales data. First, click on any value in the data. Select
Exponential from the Smoothing options. In the dialog, shown in Figure 4, move the variable
Week from the Variables in Input Data field to the Time variable pane using the arrow button
and the variable Units Sold to the Selected variable pane as shown. In the Weights panel,
check the Optimize box. In the Output Options panel, you may check the box for Produce
Forecast and enter the number of forecasts to generate from the procedure. When you click
OK, Analytic Solver generates the output in a new workbook. Figure 5 shows the summary of
the inputs. In the Parameters/Options section, we see that the optimized smoothing constant,
Alpha, is 0.63. You can see that this is close to the value of 0.6 that we estimated in the example
in Chapter 9. Figure 6 shows the fitted model and forecast for the next period using the
optimized smoothing constant.

Figure 4 Exponential Smoothing Dialog

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Figure 5 Exponential Smoothing Input Summary with Optimized Smoothing Constant

Figure 6 Optimized Exponential Smoothing Results

Double Exponential Smoothing

Finding the best model for double exponential smoothing is difficult as we would have to try
many combinations of the smoothing parameters  and . Analytic Solver provides the ability
to optimize these values using the historical data.

Example: Double Exponential Smoothing with Analytic Solver

We will use the Excel file Coal Production. First, click on any value in the data. Select Double
Exponential from the Smoothing options. The dialog is similar to the one used for single
exponential smoothing, and the completed dialog is shown in Figure 7. Note that we checked

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the Optimize box to find the best smoothing parameters. In Figure 8, we see that the best
values of  and  are 0.61 and 0.09, respectively. A portion of the results is shown in Figure 9.

Figure 7 Double Exponential Smoothing Dialog

Figure 8 Double Exponential Smoothing Input Summary with Optimized Smoothing Constants

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Figure 9 Optimized Double Exponential Smoothing Results

Holt-Winters Models
Analytic Solver provides three options for forecasting time series with seasonality using Holt-
Winters models: No Trend (seasonality only), Additive (seasonality and trend), and
Multiplicative (seasonality and trend). These options are available in the Data Mining tab
within the Time Series group by selecting Holt-Winters.

Example: Forecasting Natural Gas Usage Using Holt-Winters No-Trend Model

We will use the Excel file Gas & Electric. In using these procedures, the time variable must be
unique. Note that in the Excel file, the variable Month has repeated values. Therefore, we
added a new column called Time Period and numbered the rows sequentially. Figure 10 shows
a portion of the data along with the dialog for the Holt-Winters No Trend model. In the
Parameters pane, the value of Period is the length of the season, in this case, 12 months. Note
that we have two complete seasons of data. Figure 11 shows the input summary with the
optimized smoothing parameters. Figure 12 shows the fitted model and forecast results.

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Figure 10 Revised Data File and Holt-Winters No Trend Dialog

Figure 11 Holt-Winters No Trend Input Summary with Optimized Smoothing Constants

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Figure 12 Optimized Holt-Winters No Trend Results

Example: Forecasting New Car Sales Using Holt-Winters Additive Model with Seasonality and
Trend

We will use the New Car Sales data. There is clearly a stable seasonal factor in the time series,
along with an increasing trend; therefore, the Holt-Winters additive model would appear to be
the most appropriate. As in the previous example, we needed to add a new column for the
Time Period. Figure 13 shows the completed dialog; again, note that the Period was set to 12.
Figures 14 and 15 show the results.

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Figure 13 Holt-Winters Additive Model Dialog

Figure 14 Holt-Winters Additive Model Input Summary with Optimized Parameters

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Figure 15 Holt-Winters Additive Model Results

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