Exercises on Forecasting

Using Excel
Using Excel to generate the trend line.
Month Period Sales
Mar 1 112
Apr 2 125 60

May 3 120 50

Jun 4 133 40

Jul 5 136 30

Aug 6 146 20

Sep 7 140 10

Oct 8 155 0
0 1 2 3 4 5 6 7 8 9 10
Nov 9 152
Input Y range = This is the dependent variable ’Sales”. The
dependent variable is always at the y axis.
Input X range = This is the independent variable which is ‘Period t”
and is always at the X axis.
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.950908
R Square 0.904225
Adjusted R
Square 0.890543

Standard Error 4.811775

Observations 9

ANOVA

df SS MS F Significance F

Regression 1 1530.15 1530.15 66.08813 8.23E-05

Residual 7 162.0722 23.15317
Total 8 1692.222

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 110.1944 3.495673 31.5231 8.35E-09 101.9285 118.4604 101.9285 118.4604
Period 5.05 0.621197 8.129461 8.23E-05 3.581101 6.518899 3.581101 6.518899

To ensure a strong relationship

1. R sq ( coeff of determination) = must be close to 1 which states how many % of variation of
demand can be explained by the regression equation.
2. Std Error = shows the sd of data points about the regression equation. Should be low.
3. P-value must be less than 0.05 and Sig F must be very small = shows a stronger linear
trend.
Forecasting using Linear Regression
• Using Excel do the following:
a. Plot the line graph to determine if a
trend exists. ( Note : From the line
graph, excel can generate a trend
equation. Try it out as a self study)
b. Using regression analysis, determine
the r-square and p values and
determine if there is a relationship
between Period and Demand.
c. What other values that you can also use
to show that there is a relationship
between Period and Demand.
d. Calculate the MSE and RMSE.
e. Forecast for January and Febuary
Answer
Getting the linear trend using manual
calculations
 Getting the linear trend using manual
calculations

= 6.5

= 46.42

Total
You can do this using Excel as shown below
Using Excel to for moving average
 Using Excel for exponential smoothing
The value for alpha is
placed here.

Use absolute referencing using the $ sign so that you can change the value of alpha in cell E1 without changing the
fomulas in column D. When you do this, you can change the value of alpha to determine the lowest RMSE
Exercise

1. Sketch the 4 different demand patterns.

2. Draw the flow chart for the forecasting process
3. Identify the demand pattern for coal sales by using a line graph.
4. Do a forecast using Excel for the following methods:
A. 2 month moving average
B. Exponential smoothing with α = 0.6 ( Change the value of alpha to get the lowest RMSE)
C. Regression analysis
5. Perform a forecast accuracy check using RMSE for each of the forecasting method.
6. Which forecasting method is better?
7. Forecast the coal sales for year 9.