A company is considering whether it should use a=.1 or a=.3 for forecasting purp

Question

A company is considering whether it should use a=.1 or a=.3 for forecasting purposes. Use the following data for daily ales to arrive at a recommendation:

Day.....Demand..... Day.... Demand
1 ........35 ............8.........39
2 ........47............ 9.........24
3 ........46........... 10........ 26
4........ 39........... 11........ 36
5 ........26........... 12........ 43
6 ........33............13........ 46
7 ........24............14........ 29

For the first seven days of data compare the absolute deviation for forecasts using a=.1 and a=.3. Start with Ao=33. Which method is best?

Explanation / Answer

MAD for a = 0.3 is less. So, forecast method with a=0.3 is better than with a =0.1

a =0.1 a =0.1 a= 0.3 a =0.3 Day Demand Forecast Error Abs. Error Forecast Error Abs. Error 0 33 33 0 0 33 0 0 1 35 33 2 2 33 2 2 2 47 33.2 13.8 13.8 33.6 13.4 13.4 3 46 34.58 11.42 11.42 37.62 8.38 8.38 4 39 35.722 3.278 3.278 40.134 -1.134 1.134 5 26 36.0498 -10.0498 10.0498 39.7938 -13.7938 13.7938 6 33 35.04482 -2.04482 2.04482 35.65566 -2.65566 2.65566 7 24 34.84034 -10.8403 10.84034 34.85896 -10.859 10.85896 8 39 33.7563 5.243696 5.243696 31.60127 7.398727 7.398727 9 24 34.28067 -10.2807 10.28067 33.82089 -9.82089 9.820891 10 26 33.25261 -7.25261 7.252606 30.87462 -4.87462 4.874624 11 36 32.52735 3.472654 3.472654 29.41224 6.587763 6.587763 12 43 32.87461 10.12539 10.12539 31.38857 11.61143 11.61143 13 46 33.88715 12.11285 12.11285 34.872 11.128 11.128 14 29 35.09844 -6.09844 6.098435 38.2104 -9.2104 9.210397

34.48859 -34.4886 34.48859 35.44728 -35.4473 35.44728










MAD 9.500524

9.268846

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