Demand Forecasting

 The smoothing constant , a , is generally in the

range from .05 to .50 for business applications.
It can be changed to give more weight to recent data
(when a is high) or more weight to past data (when
a is low).
When a reaches the extreme of 1.0, then all the
older values drop out, and the forecast becomes
identical to the naive model mentioned earlier in this
chapter. That is, the forecast for the next period is
just the same as this period’s demand.
Measuring Forecast Error
Mean Abs Deviation
Mean absolute percent error (MAPE)
 Mean absolute percent error (MAPE)
The average of the absolute differences
between the forecast and actual values,
expressed as a percent of actual values