Exhibit 18.

4 - Simple Moving Average

Enter the observed demand in the blue column.
Simple
Moving Averages
Week Demand 3 Week 9 Week
1 800
2 1,400 Actual Demand
3-wk and 9-wk Simple Moving Averages
3 1,000 3-Wk Moving Average
4 1,500 1,067 9-Wk Moving Average
3,000
5 1,500 1,300
6 1,300 1,333
7 1,800 1,433 2,500
8 1,700 1,533

Demand
9 1,300 1,600
10 1,700 1,600 1,367 2,000

11 1,700 1,567 1,467

12 1,500 1,567 1,500 1,500
13 2,300 1,633 1,556
14 2,300 1,833 1,644
15 2,000 2,033 1,733 1,000
16 1,700 2,200 1,811
17 1,800 2,000 1,800 500
18 2,200 1,833 1,811
19 1,900 1,900 1,911
20 2,400 1,967 1,933 0
21 2,400 2,167 2,011 0 4 8 12 16 20 24 28 32
22 2,600 2,233 2,111 Week
23 2,000 2,467 2,144
24 2,500 2,333 2,111
25 2,600 2,367 2,167
26 2,200 2,367 2,267
27 2,200 2,433 2,311
28 2,500 2,333 2,311
29 2,400 2,300 2,378
30 2,100 2,367 2,378
 Actual Demand
3-wk and 9-wk Simple Moving Averages 3-Wk Moving Average
9-Wk Moving Average
3,000

2,500
Demand

2,000

1,500

1,000

500

0
0 4 8 12 16 20 24 28 32

Week
Examples 18.6 & 18.7 - Least Squares Regression Analysis
Enter the period and
(1) (2) (3) (4) (5) (6) observed values in th
t y t*y t2 y2 Ŷ cells in columns B an
1 600 600 1 360,000 801.3
2 1,550 3,100 4 2,402,500 1,160.9
3 1,500 4,500 9 2,250,000 1,520.5
4 1,500 6,000 16 2,250,000 1,880.1
5 2,400 12,000 25 5,760,000 2,239.7
6 3,100 18,600 36 9,610,000 2,599.4
7 2,600 18,200 49 6,760,000 2,959.0
8 2,900 23,200 64 8,410,000 3,318.6
9 3,800 34,200 81 14,440,000 3,678.2
10 4,500 45,000 100 20,250,000 4,037.8
11 4,000 44,000 121 16,000,000 4,397.4
12 4,900 58,800 144 24,010,000 4,757.1

78 33,350 268,200 650 112,502,500

6.50 = t-bar 359.62 =b

2779.17 = Y-bar 441.67 =a

Regression Equation is Y = 441.67 + 359.6*t

Exhibit 3.7 Least Squares Regression Line

6,000

5,000
Sales

4,000

3,000

2,000

1,000

0
0 2 4 6 8 10 12 14
Quarters
 Enter the period and the
observed values in the blue
cells in columns B and C.

n Line

6 8 10 12 14
Quarters
Exhibit 18.8 - Excel Regression Tool

Quarter Sales
1 600
2 1,550
3 1,500
4 1,500
5 2,400
6 3,100
7 2,600
8 2,900
9 3,800
10 4,500
11 4,000
12 4,900

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.966016
R Square 0.933186
Adjusted R Square 0.926505
Standard Error 363.8778
Observations 12

ANOVA
df SS MS F Significance F
Regression 1 18493221 18493221 139.6695 3.372024E-07
Residual 10 1324071 132407.1
Total 11 19817292

Coefficients
Standard Error t Stat P-value Lower 95% Upper 95%
Lower 95.0%
Intercept 441.6667 223.9513 1.972155 0.076869 -57.32801873 940.6614 -57.328
X Variable 1 359.6154 30.42899 11.81818 3.37E-07 291.81535792 427.4154 291.8154
Upper 95.0%
940.6614
427.4154
Exhibit 18.9 - Additive and Multiplicative Seasonal Variation
The index can be changed by entering a new value in the blue cell or using
Additive Multiplicative the arrow buttons beneat the box to change the value.
1.4
Index Index
0.95 1 -70 70 0.93
0.9 2 -140 0.86
0.8 3 -280 0.72 Trend Line
Time Series Plot - Additive vs. Multiplicative
0.6 4 -420 0.44 Additive Seasonal
Seasonalized Demands
0.8 5 -280 0.72 Multiplicative Seasonal
0.9 6 -140 0.86 Demand
1.1 7 140 1.14 6000
1.2 8 280 1.28
1.4 9 420 1.56

Demand
5000
1.2 10 280 1.28
1.1 11 140 1.14
4000
1.05 12 70 1.07

3000
Additive Additive Multiplicative Multiplicative
Month Trendline Index Demand Index Demand
1 1000 -70 930 0.93 930 2000
2 1050 -140 910 0.86 903
3 1100 -280 820 0.72 792 1000
4 1150 -420 730 0.44 506
5 1200 -280 920 0.72 864 0
6 1250 -140 1110 0.86 1075 0 10 20 30 40 50 60
7 1300 140 1440 1.14 1482
Month
8 1350 280 1630 1.28 1728
9 1400 420 1820 1.56 2184
10 1450 280 1730 1.28 1856
11 1500 140 1640 1.14 1710
12 1550 70 1620 1.07 1658.5
13 1600 -70 1530 0.93 1488
14 1650 -140 1510 0.86 1419
15 1700 -280 1420 0.72 1224
16 1750 -420 1330 0.44 770
17 1800 -280 1520 0.72 1296
18 1850 -140 1710 0.86 1591
19 1900 140 2040 1.14 2166
20 1950 280 2230 1.28 2496
21 2000 420 2420 1.56 3120
22 2050 280 2330 1.28 2624
23 2100 140 2240 1.14 2394
24 2150 70 2220 1.07 2300.5
25 2200 -70 2130 0.93 2046
26 2250 -140 2110 0.86 1935
27 2300 -280 2020 0.72 1656
28 2350 -420 1930 0.44 1034
29 2400 -280 2120 0.72 1728
30 2450 -140 2310 0.86 2107
31 2500 140 2640 1.14 2850
32 2550 280 2830 1.28 3264
33 2600 420 3020 1.56 4056
34 2650 280 2930 1.28 3392
35 2700 140 2840 1.14 3078
36 2750 70 2820 1.07 2942.5
37 2800 -70 2730 0.93 2604
38 2850 -140 2710 0.86 2451
39 2900 -280 2620 0.72 2088
40 2950 -420 2530 0.44 1298
41 3000 -280 2720 0.72 2160
42 3050 -140 2910 0.86 2623
43 3100 140 3240 1.14 3534
44 3150 280 3430 1.28 4032
45 3200 420 3620 1.56 4992
46 3250 280 3530 1.28 4160
47 3300 140 3440 1.14 3762
48 3350 70 3420 1.07 3584.5
 Exhibit 18.10 - Computing a Seasonal Factor from Actual Data and Trend Line

Seasonal
Factor (Ave. of
Actual From Trend Ratio of Same Qtrs in
Amount Equation Actual/Trend Both Years)
FITt = 170 + 55t
1 2011 I 300 225 1.33 I 1.25
2 II 200 280 0.71 II 0.78
3 III 220 335 0.66 III 0.69
4 IV 530 390 1.36 IV 1.25
5 2012 I 520 445 1.17
6 II 420 500 0.84
7 III 400 555 0.72
8 IV 700 610 1.15

800

700

600

500

400

300

200

100

0
I II III IV I II III IV
Quarter, By Year
 Exhibit 18.11 - Deseasonalized Demand

(1) (2) (3) (4) (5) (6) (7)

Average of the
Actual Same Qtr of Seasonal Deseas. Demand
Amount Each Year Factor (yd) t2

Period (t) Qtr (y) Col. (3) / Col.(5) (Col. 1)2

1 I 600 2,266.7 0.82 735.7 1
2 II 1,550 3,050.0 1.10 1,412.4 4
3 III 1,500 2,700.0 0.97 1,544.0 9
4 IV 1,500 3,100.0 1.12 1,344.8 16
5 I 2,400 0.82 2,942.6 25
6 II 3,100 1.10 2,824.7 36
7 III 2,600 0.97 2,676.2 49
8 IV 2,900 1.12 2,599.9 64
9 I 3,800 0.82 4,659.2 81
10 II 4,500 1.10 4,100.4 100
11 III 4,000 0.97 4,117.3 121
12 IV 4,900 1.12 4,392.9 144

Totals 78 33,350 12.00 33,350.0 650

Exhibit 18.12 - Straight Line Graph of Deseasonalized Equation

Original Data
Linear (Original
Data)
6,000

5,000
Demand

f(x) = 359.6153846154x + 441.6666666667

4,000

3,000

2,000

1,000

-
0 2 4 6 8 10 12 14
Quarters
1,000

-
0 2 4 6 8 10 12 14
Quarters
 (8)

t × yd
Col. (1) × Col.
(6)
735.7
2,824.7
4,631.9
5,379.0
14,713.2
16,948.4
18,733.6
20,798.9
41,932.7
41,004.1
45,290.1
52,714.5

265,707.0

Original Data
Linear (Original
Data)

12 14
12 14
Exhibit 18.15 Calculating Measurements of Forecast Error

Demand Deviation Sum of TS=RSFE/

Month Actual RSFE Abs. Dev. MAD
Forecast (Error) Abs. Dev. MAD
1 1,000 950 -50 -50 50 50 50.0 -1.00
2 1,000 1,070 70 20 70 120 60.0 0.33
3 1,000 1,100 100 120 100 220 73.3 1.64
4 1,000 960 -40 80 40 260 65.0 1.2
5 1,000 1,090 90 170 90 350 70.0 2.4
6 1,000 1,050 50 220 50 400 66.7 3.3
Average Demand: 1036.7
66.7 = Mean Absolute Deviation (MAD)
6.43% = Mean Absolute Percent Error (MAPE)
3.3 = Tracking Signal (TS)

0 #REF! #REF!
7 #REF! #REF!
Tracking Signals Tracking Signals
Tracking Signal

+5
+4
+3
+2
+1
+0
-1
-2
-3
-4
-5
0 1 2 3 4 5 6 7
Month
Exhibit 18.15 Calculating Measurements of Forecast Error

Demand Deviation Sum of TS=RSFE/

Month Actual RSFE Abs. Dev. MAD
Forecast (Error) Abs. Dev. MAD
1 1,000 950 -50 -50 50 50 50.0 -1.00
2 1,000 1,070 70 20 70 120 60.0 0.33
3 1,000 1,100 100 120 100 220 73.3 1.64
4 1,000 960 -40 80 40 260 65.0 1.2
5 1,000 1,090 90 170 90 350 70.0 2.4
6 1,000 1,050 50 220 50 400 66.7 3.3
Average Demand: 1036.7
66.7 = Mean Absolute Deviation (MAD)
6.43% = Mean Absolute Percent Error (MAPE)
3.3 = Tracking Signal (TS)

2.394 = 3-sigma Upper Control Limit

-2.394 = 3-sigma Lower Control Limit

0 2.394 -2.394 Tracking Signals

7 2.394 -2.394 Upper Control Limit
Tracking Signals
Lower Control
Tracking Signal

Limits
+5
+4
+3
+2
+1
+0
-1
-2
-3
-4
-5
0 1 2 3 4 5 6 7
Month
-1
-2
-3
-4
-5
0 1 2 3 4 5 6 7
Month
Exhibit 18.16 - Causal Relationship: Sales to Housing Starts

Number of
Sales (in Sq.
Year Housing Start
Yds.)
Permits
2002 18 13,000
2003 15 12,000
2004 12 11,000
2005 10 10,000 The regression analysis below uses the regression procedure that
2006 20 14,000 is accessed from the "Data Analysis" package that is an addin to
2007 28 16,000 Excel.
2008 35 19,000
2009 30 17,000
2010 20 13,000

SUMMARY OUTPUT
Sales (sq. yrds.)

20,000
Regression Statistics
18,000
Multiple R 0.9943856824
16,000 R Square 0.9888028854
Adjusted R Square 0.9872032976
14,000
Standard Error 331.9545545315
12,000 Observations 9
10,000
ANOVA
8,000 df SS
6,000 Regression 1 68117532.1
Residual 7 771356.7839
4,000 Total 8 68888888.89
2,000
Coefficients Standard Error
0
Intercept 6698.492 309.648
5 10 15 20 25 30 35 40
X Variable 1 344.221 13.845
Number of Housing Start Permits
2,000

0
5 10 15 20 25 30 35 40
Number of Housing Start Permits
 ression analysis below uses the regression procedure that
ssed from the "Data Analysis" package that is an addin to

MS F Significance F
68117532.1 618.1610568 0.000000
110193.8263

t Stat P-value Lower 95% Upper 95%Lower 95.0%

Upper 95.0%
21.633 0.000 5966.292 7430.693 5966.292 7430.693
24.863 0.000 311.483 376.959 311.483 376.959
Solved Problem 1

4 Weeks Ago 3 Weeks Ago 2 Weeks Ago Last Week

Monday 2,200 2,400 2,300 2,400
Tuesday 2,000 2,100 2,200 2,200
Wednesday 2,300 2,400 2,300 2,500
Thursday 1,800 1,900 1,800 2,000
Friday 1,900 1,800 2,100 2,000
Saturday
Sunday 2800 2700 3000 2900

Solution:

(a) Simple 4-wk Moving Average

Simple 4-wk
Moving
4 Weeks Ago 3 Weeks Ago 2 Weeks Ago Last Week Average
Monday 2,200 2,400 2,300 2,400 2,325
Tuesday 2,000 2,100 2,200 2,200 2,125
Wednesday 2,300 2,400 2,300 2,500 2,375
Thursday 1,800 1,900 1,800 2,000 1,875
Friday 1,900 1,800 2,100 2,000 1,950
Saturday
Sunday 2800 2700 3000 2900 2,850

(b) Weighted Average

Weighted
Solution Weights Moving
0.10 0.20 0.30 0.40 Average
Monday 220 480 690 960 = 2,350
Tuesday 200 420 660 880 = 2,160
Wednesday 230 480 690 1,000 = 2,400
Thursday 180 380 540 800 = 1,900
Friday 190 360 630 800 = 1,980
Saturday
Sunday 280 540 900 1,160 = 2,880
1,300 2,660 4,110 5,600 = 13,670
 Solved Problem 3

(1) (2) (3) (4) (5) (6) (7)

Average of the
Actual Same Qtr of Seasonal Deseasonalized
Quarter Amount Each Year Factor Demand
(t) (y) Yd tyd t2
1 300 358.0 0.53 569.0 569 1
2 540 650.0 0.96 564.1 1,128 4
3 885 1,038.0 1.53 578.9 1,737 9
4 580 670.0 0.99 587.8 2,351 16
5 416 0.53 789.0 3,945 25
6 760 0.96 793.9 4,763 36
7 1,191 1.53 779.1 5,454 49
8 760 0.99 770.0 6,160 64
0.53
0.96
1.53
0.99
Totals 36 5,432 12.00 5,432 26,107 204

900.0

800.0

700.0
Demand

600.0

500.0

400.0

300.0

200.0
Actual
100.0 Data

0.0
0 1 2 3 4 5 6 7 8 9

Period
 Enter your actual amounts in the blue area in column C.

(8) (9)

DESEASONALIZED SEASONALIZED
(yd)2 Ŷd FORECAST FORECAST
323,750 540.3 t Seasonal
318,198 579.9 Period yd Factor ys
335,148 619.5 9 857.3 0.53 452.0
345,497 659.2 10 896.9 0.96 858.6
622,537 698.8 11 936.5 1.53 1431.7
630,293 738.4 12 976.1 0.99 963.2
606,966 778.0
592,900 817.6

3,775,288

4.50 = t-bar
678.97 = Y-bar
39.62 = b
500.68 = a

Regression Equation is Y = 500.68 + 39.6*t

 Solved Problem 4

Period Actual Forecast

October 700 660 To evaluate the accuracy of your
November 760 840 forecasts, enter the period, the
December 780 750 actual values, and your forecasted
January 790 835 values in the table at the left. The
February 850 910 spreadsheet will calculate the
March 950 890 MAD, tracking signal, and MAPE
for your forecast.

Solution
Cumulative
Actual Forecast Actual Absolute Sum of
Deviation
Demand Demand Deviation Deviation Abs. Dev.
(RSFE)
October 700 660 40 40 40 40
November 760 840 -80 -40 80 120
December 780 750 30 -10 30 150
January 790 835 -45 -55 45 195
February 850 910 -60 -115 60 255
March 950 890 60 -55 60 315

Mean demand 805 Totals -55 315

MAD = 315 / 6 = 52.5

Tracking Signal = -55 / 52.5 = -1.05

MAPE = 52.5 / 805 = 6.52%