IPC’s plant estimates weekly demand for its many materials held in inventory. On
ID: 444336 • 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) Moving average is calculated of three weeks demand units
First 3 Week = 176 + 227 + 169 / 3
=247
Second 3 week = 157 + 163 + 171/ 3
=164
Third 3 week = 178 + 175 + 213 / 3
=189
Week 13 = 169 + 188 + 158 / 3
=172
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b)0.25 + 0.5 = 0.25 * 170.76 + 0.5 * 169
=42.69 + 84.50
=127.19 units
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c) 0.25 * 227 + (1- 0.25) * 169
=56.75 +126.75
=183.50
Exponential smoothing method is better to forecast having 183.50.
Week 4 = 0.25 * 176+ (1- 0.25) * 227
=44+170.25
=214.25
Week 5 = 0.25 * 171+ (1- 0.25) * 176
=42.75+132
=174.75
Week 6 = 0.25 * 163+ (1- 0.25) * 171
=40.75 +128.25
=169
Week 7 = 0.25 * 157+ (1- 0.25) * 163
=39.25+122.25
=161.50
Week 8 = 0.25 * 213+ (1- 0.25) * 157
=53.25 + 117.75
=171
Week 9 = 0.25 * 175+ (1- 0.25) * 213
=43.75 + 159.75
=203.50
Week 10 = 0.25 * 178+ (1- 0.25) * 175
=44.50+131.25
=175.75
Week 11 = 0.25 * 158+ (1- 0.25) *178
=39.50 +133.50
=173
Week 12 = 0.25 * 188+ (1- 0.25) *158
=47+118.50
=165.50
Actual - Forecast
Week 4 = 171 - 214.25 = 43.25
Week 5 = 163 -174.75=11.75
Week6 = 157 - 169=12
Week 7 = 213 - 161.50=51.50
Week 8 =175 - 171 = 4
Week 9=178 - 203.50 = 25.50
Week 10= 158 - 175.75 =17.75
Week 11 =188 - 173=15
Week 12 =169 -165.50=3.50
(MAD) = 43.25 + 11.75 + 12 + 51.50 + 4 + 25.50 + 17.75 + 15 + 3.50 / 9
= 184.25 / 9
=20.47
_________________________________________________________________________
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