IPC’s plant estimates weekly demand for its many materials held in inventory. On
ID: 444262 • Letter: I
Question
IPC’s plant estimates weekly demand for its many materials held in inventory. One such part, the CTR 5922, is being studied. The most recent 12 weeks of demand for the CTR 5922 are:
Week
Demand (units)
Week
Demand (units)
Week
Demand (units)
Week
Demand (units)
1
169
4
171
7
213
10
158
2
227
5
163
8
175
11
188
3
176
6
157
9
178
12
169
A) Use the moving average method of short-range forecasting with an averaging period of three weeks to develop a forecast of the demand for the CRT 5922 component in week 13.
B) If a smoothing constant of 0.25 is used and the exponential smoothing forecast for week 11 was 170.76 units, what is the exponential smoothing forecast for week 13?
C) Which forecasting method is preferred- the AP=3 moving average method or the =0.25 exponential smoothing method? The criterion for choosing between the methods is mean absolute deviation (MAD) over the most recent nine weeks. Assume that the exponential smoothing forecast for week 3 is the same as the actual demand.
answer a, b, and c
Week
Demand (units)
Week
Demand (units)
Week
Demand (units)
Week
Demand (units)
1
169
4
171
7
213
10
158
2
227
5
163
8
175
11
188
3
176
6
157
9
178
12
169
Explanation / Answer
A.
Forecast for 13th week = moving average at 12th week = 171.67
b. forecast for week 11 is the exponentially smoothed average of week 10.
formula for calculating average for week 11 = alpha*actuals at week 11+(1-alpha)*forecast as at week 10
foreacst for week 13th = 170.32
MAD in case of 3 period moving average (for recent 9 weeks) is 12.78, as already calculated.
Calculation of MAD in exponential smoothing:
As MAD is lower in case of exponential smoothing (10.33) than moving average (12.78), it is better.
Week Demand (units) 3 week total 3 week average Absolute value of forecast - actual 1 169 2 227 3 176 572 190.6667 4 171 574 191.3333 20.33333 5 163 510 170 7 6 157 491 163.6667 6.666667 7 213 533 177.6667 35.33333 8 175 545 181.6667 6.666667 9 178 566 188.6667 10.66667 10 158 511 170.3333 12.33333 11 188 524 174.6667 13.33333 12 169 515 171.6667 2.666667 Total 115 MAD 12.77778Related Questions
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