Operations management exponential smoothing

Description

1. The following table contains the demand from the last 5 months.

 

Month	Actual Demand
1	25
2	30
3	33
4	35
5	38

a. Calculate the single exponential smoothing forecast for these data using an α of 0.3 and an initial forecast (F₁) of 28. Report the forecast for Month 6 in AnswerSheet. Show your work in worksheet “Show your work for Q1.” (2 pts.)

b. Calculate the exponential smoothing with trend forecast for these data using an α of 0.25, a β of 0.60, an initial trend forecast (T₁) of 1, and an initial exponentially smoothed forecast (F₁) of 28. Report the forecast including trend (FIT) for Month 6 in AnswerSheet. Show your work in worksheet “Show your work for Q1.” (2 pts.)

c. Calculate the mean absolute deviation (MAD) for each forecast. Which forecasting method performs better in this problem (pick from the list)? Show your work in worksheet “Show your work for Q1.” (3 pts.)

2. Below is the sales data for Forever Young Boutique between March of Year 1 and July of Year 5.

You can find the Excel sheet containing this data in the “Show your work for Q2” worksheet. The forecast based on the simple exponential smoothing is also provided in the same worksheet based on α = 0.1.

Optimize the smoothing constant α in the exponential smoothing technique to minimize MAD (use Solver). Show your work in worksheet “Show your work for Q2.”

a.   What is the optimal α? (3 points)

b.   What is MAD under the optimal α? (1point)