Par Supply sues in Supply Chain Management 2. The US.monthly inflation rate for

Question

Par Supply sues in Supply Chain Management 2. The US.monthly inflation rate for 2016 is shown below: MONTH INFLATION MONTH INFLATION January february March Apri July August September October November December 08 1.1 1.5 1.6 1.7 2.1 1.0 0.9 1.1 1.0 a. Compute the inflation rate for January 2017 using the exponential smoothing forecast with = 0.3 and 0.5. Assume that the forecast for February 2016 is 1.4 b. What is the MAD for each of the forecasts generated using the expoe smoothing method? Which method is better? 3. The owner ofih.

Explanation / Answer

For alpha = 0.3

For alpha = 0.5

MAD for alpha 0.3 = 0.32

MAD for alpha 0.5 = 0.27

Lower the MAD, better is the process

Therefore, process with alpha = 0.27 is better

Simple Exponential Percent Squared Period 2016 Inflation Smoothing Error Abs. Error Error Error january 1.4 N/A february 1 1.4 -0.4 0.4 40.00% 0.2 march 0.9 1.3 -0.4 0.4 42.22% 0.1 april 1.1 1.2 -0.1 0.1 6.00% 0.0 may 1 1.1 -0.1 0.1 14.62% 0.0 june 1 1.1 -0.1 0.1 10.23% 0.0 july 0.8 1.1 -0.3 0.3 33.95% 0.1 august 1.1 1.0 0.1 0.1 9.99% 0.0 september 1.5 1.0 0.5 0.5 31.79% 0.2 october 1.6 1.2 0.4 0.4 27.11% 0.2 november 1.7 1.3 0.4 0.4 23.75% 0.2 december 2.1 1.4 0.7 0.7 32.50% 0.5 Jan 2017 1.6 0.07 0.32 0.25 0.13 BIAS MAD MAPE MSE

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