Exponential Smoothing

Period (t)

Actual Demand 11155

Forecast, alpha factor of 0.5 6000

4593

2866

3095

7487

7580

3221

1947

2104

8578

6585

4726

3910

5699

6639

4930

3439

Step 1:

ME

-3985

-3719

-1631

3577

1881

-3418

-2983

-1335

MAD

3985

3719

1631

3577

1881

3418

2983

1335

MAPE

87%

130%

53%

48%

25%

106%

153%

63%

Use the exponential smoothing formula to calculate the forecast for week 2.
of 0.5.
Exponential smoothing formula:
C5

Step 2:

= ABS (Mean Error)

= ABS(C6)

Find the mean absolute percentage error.

Mean Absolute Percentage Error:
C8

Step 5:
Step 6:

= C4-C5

Find the mean absolute deviation, this is the absolute difference between th
and the demand forecasted. Therefore all deviations are positive.
Mean Absolute Deviation
C7

Step 4:

= (0.5*B4)+((1-0.5)*B5)

Find the mean error, this is the difference between the actual demand and th
forecasted
Mean error:
= Actual Demand - Forecasted Demand
C6

Step 3:

= ( * the previous week demand) + ( (1 - ) * the previou

= Mean Absolute Deviation / Actual Demand (format as a p

= C7/C4

Copy the formulas across to find the forecast, ME, MAD, MAPE until week 52.
Move to sheet Exercise 2, using the tabs below

0.867515785

10

11

12

13

14

15

16

17

18

19

20

21

22

7184

2968

1845

1994

5190

1845

2222

2400

8723

4489

2800

3026

5855

2771

4978

3973

2909

2451

3821

2833

2527

2464

5593

5041

3921

3473

4413

-2010

-2128

-915

2739

-1976

-611

-127

6259

-1104

-2241

-895

2382

4413

2010

2128

915

2739

1976

611

127

6259

1104

2241

895

2382

61%

68%

115%

46%

53%

107%

27%

5%

72%

25%

80%

30%

41%

calculate the forecast for week 2. Use an alpha factor

Correct

demand) + ( (1 - ) * the previous week forecast)

between the actual demand and the demand

he absolute difference between the actual demand

eviations are positive.

on / Actual Demand (format as a percentage to 1 decimal place)

D, MAPE until week 52.

Correct

Correct

Correct

0.868

23

24

25

26

27

28

29

30

31

32

13118

5400

3370

3640

14710

6057

3778

2041

7671

6317

4664

8891

7146

5258

4449

9579

7818

5798

3920

5795

8454

-3491

-3776

-1618

10261

-3522

-4040

-3757

3751

522

8454

3491

3776

1618

10261

3522

4040

3757

3751

522

64%

65%

112%

44%

70%

58%

107%

184%

49%

8%

33

34

35

36

37

38

39

40

41

3941

4257

8238

6056

4999

4628

14917

6142

3832

4140

13588

5595

6433

10675

8408

6120

5130

9359

-2115

-742

3610

8484

-4533

-4576

-1980

8458

-3764

2115

742

3610

8484

4533

4576

1980

8458

3764

54%

17%

44%

57%

74%

119%

48%

62%

67%

42

43

44

45

46

47

48

49

50

3491

3770

9121

11745

4836

3017

3260

10033

4130

7477

5484

4627

6874

9310

7073

5045

4152

7093

-3986

-1714

4494

4871

-4474

-4056

-1785

5881

-2963

3986

1714

4494

4871

4474

4056

1785

5881

2963

114%

45%

49%

41%

93%

134%

55%

59%

72%

51

52

2577

278

5611

4094

-3034

-3816

3034

3816

118%

1373%

Exponential Smoothing and 3 Month Moving Average Exercise

A
1

AA

AB

AC

AD

AE

AF

AG

AH

AI

AJ

AK

AL

AM

AN

AO

AP

AQ

AR

AS

AT

AU

AV

AW

AX

AY

AZ

BA

Exponential Smoothing

2
3

Period (t)

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

Actual Demand

11155

4593

2866

3095

7487

7580

3221

1947

2104

7184

2968

1845

1994

5190

1845

2222

2400

8723

4489

2800

3026

5855

13118

5400

3370

3640

14710

6057

3778

2041

7671

6317

3941

4257

8238

14917

6142

3832

4140

13588

5595

3491

3770

9121

11745

4836

3017

3260

10033

4130

2577

278

Forecast

6000

7547

6660

5522

4794

5602

6195

5303

4296

3639

4702

4182

3481

3035

3681

3130

2858

2721

4521

4512

3998

3706

4351

6981

6507

5566

4988

7905

7350

6279

5007

5806

5960

5354

5025

5989

8667

7910

6686

5922

8222

7434

6251

5507

6591

8137

7147

5908

5114

6589

5852

4869

-3356

-1836

-908

-3275

-4591

3275

4591

ME

-2954

-3794

-2427

2693

1978

-2974

-2192

3545

-1734

-2337

-1487

2155

-458

6002

-32

-1712

-972

2149

8767

-1581

-3137

-1926

9722

-1848

-3572

-4238

2664

511

-2019

-1097

3213

8928

-2525

-4078

-2546

7666

-2627

-3943

-2481

3614

5154

-3301

-4130

-2648

4919

-2459

MAD

2954

3794

2427

2693

1978

2974

3356

2192

3545

1734

2337

1487

2155

1836

908

458

6002

32

1712

972

2149

8767

1581

3137

1926

9722

1848

3572

4238

2664

511

2019

1097

3213

8928

2525

4078

2546

7666

2627

3943

2481

3614

5154

3301

4130

2648

4919

2459

MAPE

64%

132%

78%

36%

26%

92%

172%

104%

49%

58%

127%

75%

42%

100%

41%

19%

69%

1%

61%

32%

37%

67%

29%

93%

53%

66%

31%

95%

208%

35%

8%

51%

26%

39%

60%

41%

106%

62%

56%

47%

113%

66%

40%

44%

68%

137%

81%

49%

60%

43

46

49

127% 1652%

0.3

Alpha Factor

10
11

52

-13516 160876 5023%

EXERCISE 2:

Change the alpha factor to values between 0 and 1. Try to find the best alpha factor.

12
13

16000

14

14000

15
16

12000

17

10000
Demand

18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

8000
6000
4000
2000
0
1

10

13

16

19

Actual Demand

22

25
28
Week
Forecast

31

34

37

40

52

Linear (Forecast)

Exercise 2

Reflection:
Question 1a)
Question 1b)

Is exponential smoothing a good technique for using in the aerial simulation game?
Why?
More react to recent changes rather than all past observation.

Question 2

What could you do to improve the accuracy of the forecast?

he aerial simulation game?

No

Exponential Smoothing (monthly)

Period (t)

Actual Demand

21709

20235

14101

12014

15626

20949

27777

19807

Forecast

21661

21676

21244

19101

16975

16570

17884

20852

-1441

-7143

-7087

-1349

4379

9893

-1045

ME

MAD

MAPE
Alpha Factor

1440.723 7142.506 7086.795 1349.031 4379.099 9893.264 1044.715

7.1%

50.7%

59.0%

8.6%

20.9%

35.6%

5.3%

0.3

EXERCISE 4:

Change the alpha factor to values between 0 and 1. Try to find the best alpha fa

35000

30000

Demand

25000

20000

15000

10000

5000

0
1

Month

Actual Demand

Forecast

10

10

11

12

13

31353

27702

21977

22858

17018

20538

23783

24958

24064

23702

10815

3919

-2981

-1206

-6684

10814.7

3919.29 2981.497 1206.048 6684.234

34.5%

14.1%

to find the best alpha factor.

11

12

13

13.6%

5.3%

39.3%

3 Month Moving Average

Period (t)
Actual History

10

11155

4593

2866

3095

7487

7580

3221

1947

2104

7184

3 month moving average

6204.7

3518

4483

6054

6096

4249

2424

ME

-3110

3969

3097

-2833

-4149

-2145

4760

MAD

3110

3969

3097

2833

4149

2145

4760

MAPE

100%

53%

41%

88% 213% 102%

66%

182818 5697%

Step 1:

Find the average of the previous three months

Three month average:
= (Month 1 Demand + Month 2 Demand + Month 3 Demand)
E5

Step 2:

Find the mean error, this is the difference between the actual demand and
forecasted
Mean error:
E6

Step 3:

= SUM(B4:D4)/3
]

= Actual Demand - Forecasted Demand

= E4 - E5

Find the mean absolute deviation, this is the absolute difference between
demand and the demand forecasted. Therefore all deviations are positive.
Mean Absolute Deviation
= ABS (Mean Error)
E7

= ABS(E6)

Find the mean absolute percentage error.

Mean Absolute Percentage Error:
= Mean Absolute Deviation / Actual Demand (format as a p

Step 4:

E8

Step 5:

= E7/E4

Copy the formulas across to find the forecast, ME, MAD, MAPE until week 52.

11

12

13

14

15

16

17

18

19

20

21

2968

1845

1994

5190

1845

2222

2400

8723

4489

2800

3745

4085

3999

2269

3010

3010

3086

2156

4448

-777

-2240

-2005

2921

-1165

-788

-686

6567

777

2240

2005

2921

26% 121% 101%

56%

23

24

25

3026

5855 13118

5400

3370

5204

5337

3438

3894

7333

8124

41

-2404

-2311

2417

9224

-1933

-4754

1165 787.7 685.7

6567 40.67

2404

2311

2417

9224

1933

4754

63%

75%

86%

76%

41%

70%

36% 141%

35%

29%

mand + Month 3 Demand) / 3

the actual demand and the demand

lute difference between the actual

deviations are positive.

l Demand (format as a percentage to 1 decimal place)

ntil week 52.

1%

22

26

27

28

29

30

31

32

33

34

3640 14710

6057

3778

2041

7671

6317

3941

7296

4137

7240

8136

8182

3959

4497

-3656

10573

-1183

-4358

-6141

3712

3656 10573

1183

4358

6141

20% 115% 301%

100%

72%

35

36

37

38

39

40

4257

8238 14917

6142

3832

4140 13588

5343

5976

4838

5479

9137

9766

8297

4705

1820

-1402

-1719

3400

9438

-2995

-5934

-4157

8883

3712

1820

1402

1719

3400

9438

2995

5934

4157

8883

48%

29%

36%

40%

41%

63%

49% 155% 100%

65%

41

42

43

5595

3491

7187

44

45

46

47

3770

9121 11745

4836

7774

7558

4285

5461

-1592

-4283

-3788

4836

1592

4283

3788

28% 123% 100%

48

49

50

51

52

3017

3260 10033

4130

2577

278

8212

8567

6533

3704

5437

5808

5580

6284

-3376

-5550

-3273

6329

-1307

-3231

-5302

4836

6284

3376

5550

3273

6329

1307

3231

5302

53%

54%

70% 184% 100%

63%

32% 125%

1907%

Aerials demand data:

Period Previous Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

11155
4593
2866
3095
7487
7580
3221
1947
2104
7184
2968
1845
1994
5190
1845
2222
2400
8723
4489
2800
3026
5855
13118
5400
3370
3640
14710
6057
3778
2041
7671
6317
3941
4257
8238
14917
6142
3832
4140
13588
5595
3491
3770
9121
11745
4836
3017
3260
10033
4130

Current Year
12500
5200
3600
4800
6000
8500
4700
3200
3200
7600
3300
2400

51
52

2577
278