Example of simple exponential smoothing, Mechanical Engineering

Example of simple exponential smoothing:

A TV manufacturer utilizes simple exponential smoothing with α = 0.1 to forecast demand. For the first week of March, the forecast was 400 units while actual demand turned out to be 370 units.

1. Forecast the demand for the second week of March.

2. If the actual demand for the second week turned out to be 417 units, forecast the demand for the 3rd week. Continue forecasting for the subsequent four weeks. You can take actual demands for the subsequent weeks as 409, 388, 377, 445, and 410 units.

3. Develop an adjusted exponential forecast for this company. You may assume the initial trend adjustment factor Tt as zero and β = 0.1.

Solution

(a) Ft + 1 = Ft + α (Dt - Ft)

                     = 400 + 0.1 (370 - 400) = 397 units.

 (b)

707_Adjusted Exponential Smoothing.png

(c)        The trend adjustment is accomplished by total of a correction factor

[(( 1 -β )/ β ) Tt +1 )]   to the simple exponential forecast.

As the initial trend adjustment factor (given) Tt = 0, we have

March 1st Week

Tt + 1 = β (Ft + 1 - Ft) + (1 - β) Tt

= 0.1 (397 - 400) + (0.9) (0) = - 0.30

T(t +1) adj = Ft +1 +( 1 -β / β )T t +1

= 397 +( 0.9/0.1)  (- 0.30) = 394.30

The adjusted forecast for the second week of March = 394.30.

March 2nd Week

Tt + 1 = 0.1 (399 - 397) + (0.9) (- 0.30)

= 0.2 - 0.27 = - 0.07

F(t + 1) adj = 399 + 9 (- 0.07) = 398.37

The remaining values may be put in table form, as below.

606_Adjusted Exponential Smoothing1.png

The trend-adjusted forecast for the third week of April is Ft, adj   = 393.54 units whereas simple exponential forecast for the same week is 400 units.

The main reason for broad use of simple and adjusted exponential smoothing is that the forecast may be computerized quickly, requires very little memory space, and data can be updated easily. These methods are specifically useful to firms which have thousands of items in inventory. Since each forecast value contains all past forecast and demand data in the properly exponentially weighted manner, there is no requirement to maintain records of historical data (as in case of arithmetic moving averages). It is an effective and efficient method of forecasting with a built-in means of tracking the average while discounting the erratic random fluctuations.

Posted Date: 2/1/2013 12:05:04 AM | Location : United States







Related Discussions:- Example of simple exponential smoothing, Assignment Help, Ask Question on Example of simple exponential smoothing, Get Answer, Expert's Help, Example of simple exponential smoothing Discussions

Write discussion on Example of simple exponential smoothing
Your posts are moderated
Related Questions
Open system The system that exchange both the mass and energy (or Heat and work) with the surrounding of it. The mass within the system is necessarily constant. The nature of

What is ignition angle offset

Q. Explain about wire-frame model? A wire-frame model of an object is the simplest, but more verbose, geometric model that can be used to represent it mathematically in the com

A hollow circular shaft has an internal diameter of 48 mm and an external diameter of 54 mm. Calculate the shear stress produced at the outer and inner surfaces of the shaft when t

Resistance Spot Welding In this process, a spot of weld is made between overlapping sheets by means of two cylindrical copper alloy electrodes, one on top and the other at the

how can we modified truss to make sure it can support 20% more forces than usual?

Evaluate the tension in the rope: Determine the tension in the rope. Solution KE of the free-body of flywheel is developed due to (i) work-done by tension T in the rop

CLASSIFICATION OF ELECTRODES The classification system used in the specification AWS A 5.1 which is for carbon steel electrodes follows established pattern for AWS filler metal s

Single piece pattern These are inexpensive and the simplest type of patterns. As the name indicates, they are made of a single piece as shown in Figure.2.2 this type of pattern

Closed System: The system that can exchange energy with the surrounding but not the mass. The quantity of matter hence remains fixed. And the system can be described as cont