A Comparison of Methods For Forecasting The Container Throughput in North Adriatic Ports

IAME 2014 Conference Norfolk VA USA
Paper ID 76, ACCEPTED FOR PRESENTATION & REVISED
A comparison of Methods for Forecasting the Container

Throughput in North Adriatic Ports
Dejan Dragan*, Tomaz Kramberger, Marko Intihar

University of Maribor, Faculty of Logistics, Celje, Slovenia
*
Corresponding author. E-mail: dejan.dragan@fl.uni-mb.si
Abstract
In today's globalization and sharpening conditions, containerization plays an extremely

important role in the international trade. Cut-throat competition with regard to shipping routes
has a significant impact on ports, their operations, construction and re-design. The container
throughput is also responsible for large investments in port infrastructure development. The
paper addresses three approaches to the forecasting of container throughput, which have been
applied to the North Adriatic ports Koper (Slovenia), Venice, Trieste and Ravenna (Italy).
Ports authorities aim to establish a sufficiently accurate forecasting decision support system
since they try to follow global trends in the optimization of port operations and facilities. The
forecasting approaches include the Holt-Winters exponential smoothing model, the classical
decomposition model and the autoregressive integrated moving-average model (ARIMA).
The models were trained and tested for the 10 year-period container throughput data for the
quarter-divided years 2002-2012. The comparison of prediction results is based on
observations of the mean absolute error, the mean absolute percent error and the root mean
square error. The results show that the ARIMA model delivers the best performance, while
the Holt-Winters model outperforms the decomposition model. This indicates that, in times of
the economic crisis, the previous leading role of simpler forecasting models is not self-evident
anymore and that sometimes more complex models must be applied.
Keywords: Container throughput, Forecasting, Holt-Winters method, Classical

decomposition time series model, ARIMA model.
1. Introduction
Nowadays, the definition of the term port has changed significantly due to the technological
development of maritime transport and its importance for national economies. Cargo
throughput is an extremely important port activity because it is closely related to the
operations, development plans, reconstruction, organization of port processes, and so on
(Zhang et al, 2013).
The need for a sufficiently accurate cargo throughput forecast is not surprising since it can
significantly influence the port development strategy, investments in infrastructure, daily
A Comparison of Methods for Forecasting the Container
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operations management, etc (Zhang et al, 2013). It is therefore obvious that the inability to
have accurate forecasts may cause a massive damage, especially from the financial point of
view. Managerial decisions relying on inaccurate or deficient forecasts can lead to inadequate
infrastructure investments, inappropriate future port strategy and improper port upgrading or
redesign decisions (Peng and Chu, 2009).
For cargo throughput forecasts, quantitative forecasting approaches related to statistical

methods and mathematical models usually yield the most reliable prediction results. These
methods ensure a systematic apparatus based on statistical principles and can predict the
future of the time series by means of historical data observations (Zhang et al, 2013).
In this his paper, three forecasting approaches were compared in order to predict the 20-foot
container throughput volume time series. The work represents a part of the prototype for a
forecasting decision support system for four ports in the North Adriatic area (part of the
Mediterranean Sea): one Slovenian (Port of Koper) and three Italian (Port of Venice, Trieste
and Ravenna1). These ports are, together with the port of Rijeka, the members of so-called
NAPA (North Adriatic Ports Association). Surprisingly, only a few authors (for example
Jugovi et al, 2011) carried out similar research studies for NAPA ports.
The three well-known forecasting approaches include the model based on Holt-Winters
exponential smoothing method, the classical decomposition time series model and the
autoregressive integrated moving-average model (ARIMA). The Holt-Winters and
decomposition models are represented in the additive and multiplicative form. The
corresponding models are trained and tested for the 10 year-period container throughput
historical quarterly data set of 42 measurements, which corresponds to the sequence of years
2002-2012. The comparison of prediction results of developed models is based on
observations of the mean absolute error, mean absolute percent error and the root mean
square error.
There have been two major motives for conducting this study. The first one was applicative
since the authorities of the Port of Koper asked us to carry out this piece of research in order
to identify the type of forecaster that would be most convenient to support managerial
decisions in NAPA. The second motive was conceptual and related to the methodology. One
study in particular (Xie et al, 2013) attracted our attention since it indicated that, in times of
the economic crisis, the nature of the throughput time series has become more complex.
Consequently, more complex forecasting models are needed, which can significantly
outperform the models with a simpler structure. The aim of our study was therefore to verify
whether this fact also holds true for NAPA ports.
1
Unfortunately, the Port of Ravenna resigned from NAPA in November 2012.
IAME 2014 Conference, July 15-18 Norfolk, VA, USA 2

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The results show that the more complex ARIMA models and Holt-Winters models actually
achieve significantly better prediction results than the simpler decomposition models.
Therefore, we suspect that the economic crisis has perhaps changed certain circumstances in
the field of throughput forecasting, where the simpler models have probably lost some of their
previous validity. Our research findings suggest us to be very careful when applying the
simpler models, such as decomposition models, since the crisis may significantly lower their
predictive power. Surprisingly, we noticed a significant gap in similar research focusing on
how the global crisis changed the performance of certain models with the simpler
complexity. Although the latter played a leading role before the crisis, this is not self-evident
anymore. And this finding is believed to be one of the major contributions of the present
paper.
The paper is organized as follows. Section 2 presents a brief literature review of the existing
approaches for forecasting the container throughput. A description of the ports and the treated
historical data of container throughput are given in Section 3. The methods for deriving
corresponding forecasting models are briefly discussed in Section 4. In Section 5, an excerpt
of the numerical prediction results is given, and the comparison of predictive power and
accuracy of the derived forecasting models is provided.
2. Literature review
A review of the literature of the last 20 years reveals the whole spectrum of scientific papers
about forecasting the container throughput. The latter include different simpler models, like
exponential smoothing time series models, regression time series models, distributed lag
models, etc., which are easier to understand. More sophisticated models were also introduced,
such as Box-Jenkins autoregressive models, neural networks models, nonlinear time series
models, state space models and so on, which apply more complex theory methods, like
advanced econometric methods, chaos theory, artificial intelligence, emerging systems and
automata (Goulielmos and Kaselimi, 2011).
As evident from the existing literature, many authors emphasize forecasting difficulties,
which can be particularly bothersome, when exogenous factors have a significant impact on
the behavior of cargo throughput time series. In such cases, the development of forecasting
models may require greater effort in order to construct the appropriate model (Goulielmos and
Kaselimi, 2011). Table 1 shows some of the methods for solving different forecasting and
similar problems in the field of maritime economics and transportation (Goulielmos and
Kaselimi, 2011).
Besides the approaches mentioned above, some other models for forecasting container
throughput were developed, such as an error-correction model (Fung, 2002), six univariate

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forecasting models (classical decomposition model, trigonometric regression model,

regression model with seasonal dummy variables, the grey and hybrid grey model, SARIMA
model) (Peng and Chu, 2009), combined grey-forecast and Logistic-growth-curve model
(Zhang et al, 2013), hybrid approaches based on least squares support vector regression
(LSSVR) model (Xie et al, 2013), and other.
As already mentioned in the introduction, the paper (Xie et al, 2013) is particularly interesting
since it discovered an increasing role of more complex forecasting models after the
occurrence of the global economic crisis. The authors focused on three hybrid approaches
based on least squares support vector regression, attempting to deal with the nonlinear and
volatile nature of throughput time series. Similarly, but still restricted to linear assumptions,
our study aimed to verify whether the more complex ARIMA and Holt-Winters models
achieve better prediction results than the simpler decomposition models. If this holds true, the
conclusions would be significantly different than the ones by Peng and Chu, (2009), where
the decomposition model was found to be the most suitable. However, at that time, the
magnitude of the economic crisis was not yet revealed.
Table 1 Some of the methods, used for the solving of different forecasting and similar
problems in maritime economics and transportation
Authors Year Methodology Purpose
Prediction of future volumes of
Walter and Younger 1988 Iterative nonlinear programming model total waterborne imports and
exports
Forecasting maritime traffic flow in
Gooijer and Klein 1989 Multivariate time series model
the port of Antwerp
Forecasting future supply of
Tongzon 1991 Exponential regression model due to correlation coefficients shipping services in the port of
Melbourne
Identification of the Mediterranean
Zohil and Prijon 1999 Linear regression based on least squares methods
transshipment pattern
Identification of influence of
Seabrooke et al 2003 OLS regression (43 equations)
economic indicators on cargo traffic
Combined Univariate ARIMA and a Neural Networks (NN)
Mostafa 2004 Forecasting of Suez Canal traffic
model
Statistical and econometric methods, frequently used in Presentation of methods in the field
Washington et al 2004
transportation of transportation
Forecasting of 37 types of cargo
Lam et al 2004 Neural Network (NN) model
traffic in the port of Hong Kong
Nonlinear forecasting of container
Goulielmos and Kaselimi 2011 Nonlinear time series analysis and chaos theory
traffic in the Port of Piraeus
3. The description of the ports and the historical data
The North Adriatic Ports Association (NAPA) was founded in March 2010 by the Port
Authorities of Ravenna, Venice, Trieste (Italy) and Koper (Slovenia). The Port of Rijeka

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(Croatia) became a full member in November 2010 (NAPA, 2014). North Adriatic ports are
located in the northern tip of the Mediterranean Sea (cf. Figure 1).
The highly suitable location of NAPA ports in the northern corner of the Adriatic Sea
provides a waterway that penetrates relatively deeply into the South-East side of the European
continent. Consequently, the route from the Far East via Suez to Europe is about 2,000
Nautical miles shorter than in the case of other North-European ports (NAPA, 2014). The
NAPA ports could thus represent very interesting gateway to key European markets and
enable steady and updated supply of goods to approximately 500 million European consumers
(NAPA, 2014).
The main reason for the establishment of NAPA was the desire to improve the ports
competitive position with respect to the other important European port regions, especially
those in Northern Europe. Naturally, there have been many other reasons to establish this
association, such as the development of a mutual strategy of coordinated operations in the
field of international trade, coordinated planning of regulations related to the provision of
services, harmonization of development of hinterland and maritime supply chain networks,
development of a coordinated strategy about future port and infrastructure development, etc.
(NAPA, 2014).
Figure 1 North Adriatic Ports
The total throughput of the five common branded NAPA ports was 101.44 million tones in
2009 (prior to Rijeka joining NAPA).In 2010, it increased to 120 million tones, where the
container throughput accounted for 1.471.908 TEUs (NAPA, 2014). Table 2 shows the
comparison of total throughput and container traffic of NAPA ports with respect to some
other important European ports (NAPA, 2014). Although NAPA ports combined their efforts

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to be more competitive with respect to the other significant ports in Europe, there still exists
some competition among them too, of course.
Table 2 Comparison of total throughput and container traffic for NAPA ports with
respect to some other important European ports (2011)
Port Total throughput (mil. tones) Container traffic (mil. TEUs)
Rotterdam 434.0 11.8
Antwerp 187.1 8.6
Hamburg 132.2 9.0
NAPA Ports 124.2 1.8
Marseille 88.2 0.9
Bremen 80.5 5.9
Zeebrugge 47.0 2.2
Source: NAPA, 2014.
3.1 The nature of cargo and historical data
The cargo in NAPA ports consists of different types of goods, such as general cargo,
containers, vehicles, fuels, different kinds of chemicals, bulk products, iron and steel
products, agric-food produce, cements, industrial products, miscellaneous goods, project
cargoes, etc. (NAPA, 2014). These ports also offer services for passengers by means of
cruisers, ferries and fast vessels. Since this study focuses on the observation and prediction of
20-feet containers throughput time series (in thousands of tones), only the historical data for
this type of cargo is presented here (cf. Figure 2).
Figure 2 The data for 20-feet container throughput time series for observed ports: a)
Koper, b) Ravenna, c) Trieste, d) Venice

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Unfortunately, the study could not include the Port of Rijeka since the data required was not
available. The data was collected by means of Eurostat and some other statistics databases
(Eurostat, 2013). As shown in Figure 2, a historical data set corresponds to the period 2002-
2012. This sequence is divided into quarters, beginning with the first quarter of 2002 and
ending with the second quarter of 2012, which corresponds to 42 measurements. The time
series shown in Figure 2 has been appropriately pre-processed, which means cutting off of all
undesired outliers, spikes and other unwanted non-regularities.
As shown in Figure 2, the throughput for the Port of Koper has more or less gradual and
steady growth trend in the entire time scale. The ports of Ravenna, Trieste and Venice exhibit
more unsteady behavior and even some significant drop-downs, particularly in the period
after 2008. The reason could be the global economic crisis, which affected a significant part
of the world (Pallis and Langen, 2010). Therefore, it can be concluded that the time series
would probably be steadier after 2008 if the crisis would not erupt.
4. Methodology for forecasting models
In this section, the methodology for the following forecasting models will be briefly
discussed: the classical decomposition model (additive and multiplicative), the Holt-Winters
exponential smoothing model (additive and multiplicative), and the ARIMA model.
4.1 Classical decomposition model
With the classical decomposition method, the time series is decomposed into four
components: trend, cyclical, seasonal and irregular component. These models have no
theoretical basis, but have been found useful when the parameters describing a time series are
not changing over time (Bowerman and O'Connel, 1993).
4.1.1 Multiplicative decomposition model
By using the multiplicative procedure, we assume that the measured data is the product of
time series components as follows (Bowerman and O'Connel, 1993, Peng and Chu, 2009):
y t T t S t C t I t (1)
where y t represents the measured value of the time series at time t, T t denotes the trend
component, S t is the seasonal component, C t denotes the cyclical component, and I t
is the random irregular component at time t (Peng and Chu, 2009).
In the first step of the procedure, precisely explained in (Bowerman and O'Connel, 1993) and
(Peng and Chu, 2009), the decomposition algorithm must somehow estimate the product
T t C t from the data. For this purpose, the 4-period (our data is quarterly!) moving-

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average series MA t should be first derived from the data, and then the centered moving-
average CMA t can be calculated as follows: CMA t MA t MA t 1 / 2 . Since the
CMA t can be equated with the product T t C t , the relation CMA t T t C t can
be used to calculate the product S t I t from the expression (1), as follows:
y t y t
S t I t (2)
T t C t CMA t
After the estimation of S t by means of averaging the product S t I t for each quarterly
period, the trend component T t must be estimated in the next step. For this purpose, the de-
seasonalized series d t is first calculated by dividing the data with the estimated seasonal
index: d t y t / S t . After that, the variable d t can be used to estimate the trend T t
by assuming the following polynomial trend model:
T t d t 0 1 t 2 t 2 n t n t (3)
The point estimates ai of the parameters i in this polynomial can be obtained by means of
the least squares method. Since we do not know the optimal order of the polynomial (3), the
estimation is done for different orders up to the fifth order ( n 1, ,5 ) in order to estimate
the best order m and the corresponding parameters. The regression model with the best fitting
represents the estimate for the trend component:
T t a0 a1 t a2 t 2 am t m (4)
The cyclical component is very difficult to model since it takes from 2 to 10 years to complete
one cycle, and three or four complete cycles of data are required to establish a clear cyclical
pattern. In some cases, even up to 30 or 40 years of data observations are required to obtain a
good model for C t (Gaynor and Kirkpatrick, 1993). In our case, the cyclical component is
thus considered a part of irregular fluctuations due to the lack of data for modeling the C t .
The final result of the multiplicative procedure is the time series forecast for the selected time
period t , which can be obtained by multiplying the estimated trend and the estimated seasonal
component:
y t T t S t (5)
4.1.2 Additive decomposition model
By using the additive procedure, we assume that the measured data is the sum of time series
components as follows (Bowerman and O'Connel, 1993):

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y t T t S t C t I t (6)
where the meaning of the symbols is the same as in the multiplicative case. All the steps of
the procedure presented in the multiplicative case can also be used in the additive approach.
The only difference is that we now deal with subtraction operations instead of the division
operations presented before. At the end, the time series forecast for the selected time period t
can be obtained by summation of trend and seasonal components:
y t T t S t (7)
4.2. Holt-Winters exponential smoothing model
This method belongs to the Exponential smoothing methods, which are most effective when
the components (trend and seasonal factors) of the time series may be changing over time
(Bowerman and O'Connel, 1993). These methods weight time series unequally, which means
that more recent observations are weighted more heavily than more remote observations. The
unequal weighting is accomplished by using one or more smoothing constants (parameters),
which determine how much weight is given to each observation (Bowerman and O'Connel,
1993). The most typical exponential smoothing methods are: Simple single exponential one-
parameter smoothing, where the level of the time series with no trend is assumed to be
changing occasionally, and an estimate of the current level is required (Hanke and Wichern,
2008); Holt's trend corrected double two-parameter exponential smoothing, where the
presence of trend in observed data is noticed and linear trend forecast function is needed
(Hanke and Wichern, 2008); Holt-Winters triple three-parameter smoothing as an extension
of basic Holt's method, which is used when the presence of seasonal variation in time series is
also be possible besides the trend (Hanke and Wichern, 2008).
Holt-Winters method can appear in two forms: in multiplicative and additive (Bowerman and
O'Connel, 1993). Both forms are designed for time series that exhibit linear trend at least
locally if not over the range of the entire time series. The additive method is used for time
series with constant (additive) seasonal variation, while the multiplicative method is used for
time series with increasing (multiplicative) seasonal variation (Bowerman and O'Connel,
1993).
4.2.1. Multiplicative Holt-Winters model
This method is generally considered to be best suited for forecasting time series that can be
described by the following expression (Bowerman and O'Connel, 1993):
y t ( 0 1 t ) S t I t (8)

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where y t is a time series at time t, S t is a seasonal pattern, I t is an irregular

component, and 1 represents the growth rate. The estimate l T for the level, the estimate
b T for the growth rate, and the estimate s T for the seasonal factor of the time series in
time period T are given by the following smoothing equations (Bowerman and O'Connel,
1993):
y T
T (1 ) T 1 b T 1
s T L
b T T T 1 (1 ) b T 1
(9)
y T
s T (1 ) s T L
l T
where , and are smoothing constants between 0 and 1, l T 1 and b T 1 are the
estimates in time period T 1 , while s T L is the estimate in time period T L and L
is the number of seasons in a year. Point estimate made at time T for y T p can be given
by (Bowerman and O'Connel, 1993):
yT p T T p b T s T p L ( p 1, 2,3,...) (10)
where s T p L is the "most recent" estimate of the seasonal factor for the season
corresponding to time period T p , and p is the number of periods ahead to be forecasted.
The Holt-Winters multiplicative procedure starts with finding estimates for the initial level,
trend, and L seasonal factors. For this purpose, the fitting of a least squares trend line to a
historical data is usually done at first to find the initial intercept l 0 , initial slope b 0 , and
initial estimates y t , t 1,..., N , where N is the number of time periods used in least squares
regression. After that, the data can be de-trended by computing y t / y t , t 1,..., N , and
finally, the initial seasonal factors in each of L seasons can be found by computing the
average of the de-trended values for the corresponding season. After finding of all needed
initial values, the procedure is ready to use the smoothing equations (9) and to calculate the
point forecasts (10). Naturally, the interval forecasts inside the prediction interval can also be
calculated. All the details of the Holt-Winters multiplicative procedure can be found in
(Bowerman and O'Connel, 1993).
Many authors have developed different procedures to select the smoothing constants ,
and (Diaz et al, 2011). All procedures can be divided into two major categories: 1.)
estimation of the smoothing constants in a minimization problem, where the objective
function contains the forecasting error, or: 2) a simple but reliable method to test the model at

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different values of , and over their range [0,1] to find the best set of values providing
the least amount of forecasting error (Diaz et al, 2011). This study has used the latter
approach for estimation of , and .
4.2.2. Additive Holt-Winters model
For this method, the time series can be described by the following expression (Bowerman and
O'Connel, 1993):
y t ( 0 1 t ) S t I t (11)
where the meaning of the symbols is the same as in the case of the multiplicative method. The
estimates for l T , b T and s T in time period T are given by the following smoothing
equations (Bowerman and O'Connel, 1993):
T y T s T L (1 ) T 1 b T 1
b T T T 1 (1 ) b T 1
(12)
s T y T l T (1 ) s T L
where the meaning of symbols is also the same as in the case of the multiplicative method.
The point estimate made at time T for y T p can be given by (Bowerman and O'Connel,
1993):
yT p T T p b T s T p L ( p 1, 2,3,...) (13)
The mechanism of the Holt-Winters additive procedure is similar as the briefly described
mechanism for the multiplicative case (Bowerman and O'Connel, 1993).
4.3. The Autoregressive integrated moving average model (ARIMA)
In this chapter, the basic principles of the Box-Jenkins methodology will be briefly
introduced. In addition, the main characteristics of the structure of ARIMA models will also
be briefly presented.
4.3.1. The Box-Jenkins methodology
ARIMA processes are a class of stochastic processes used to analyze time series. The
application of the ARIMA methodology for the study of time series analysis by use of
ARIMA models was first introduced by Box and Jenkins (Box and Jenkins, 1970, Contreras

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et al, 2003). The Box-Jenkins methodology for time series modeling consists of a four-step
iterative procedure (Bowerman and O'Connel, 1993):
1. Step: Preliminary (tentative) identification process observed data are used to

tentatively identify the suitable Box-Jenkins time series model.
2. Step: Estimation procedure observed data are used in order to estimate the parameters
of the identified model.
3. Step: Diagnostic checking procedure different diagnostics are used to inspect the
adequacy of the identified model. If needed, an improved model is also suggested, which is
then considered as a new preliminary identified model.
4. Step: Forecasting - once a final model is derived, it can be used for the forecasting of
future time series values.
Identification step can be divided into two parts: Data preparation and selection of the
model of stationary time series. During data preparation, the data must be transformed, if
unstable variance is present, and it must be differenced in order to remove trends and achieve
stationarity (homogenous mean, variance and other statistical properties) if non-stationarity is
found (Faisal, 2012). The visual observation of the time series, correlogram analysis, where
non-stationary series is having slowly decaying ACF (Autocorrelation function) and PACF
(Partial ACF), and the unit-root tests of the data usually provide the tool for determining
whether the series is stationary or not (Faisal, 2012). During the selection of model, the
behavior of ACF and PACF of treated stationary time series is usually studied to get the
autoregressive (AR), moving average (MA), or mixed (ARMA) model of certain order.
Naturally, the whole family of potential models can be formed in the identification step
(Makridakis et al, 1998).
In the estimation step, the initial estimates of parameters of potential models are firstly
computed and then the final estimates are generated by an iterative process (Gaynor and
Kirkpatrick, 1993). Computer programs for fitting ARIMA models will automatically find
appropriate initial estimates and then refine them until the optimum values of the parameters
are found using the maximum likelihood (or some other appropriate) estimation procedure
(Makridakis et al, 1998). Since there may be more than one plausible model identified after
the completion of estimation procedure, the Akaike's Information Criterion (AIC), Bayesian
Information Criterion (BIC) and/or Final Prediction Error (FPE) are usually calculated in
order to select the best model (Makridakis et al, 1998).
In the diagnostic checking step, the adequacy of the selected model must be verified. For this
purpose, the residuals are studied to see if any pattern remains unaccounted for (Makridakis et
al, 1998). For a good forecasting model, the residuals left over after fitting should be as
similar to white noise as possible (Makridakis et al, 1998). Therefore, the ACF and PACF of

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the residuals must be obtained to find out if no significant autocorrelations and partial
autocorrelations exist. A Portmanteu (Ljung-Box) test can also be applied to the residuals as
an additional test of fit, which shows us if the residuals can be considered as a white noise
series (Makridakis et al, 1998).
In the forecasting step, the appropriate model is finally found. It can be used to produce the
future forecasts. Confidence intervals can be also computed for each of the point forecasts
(Gaynor and Kirkpatrick, 1993).
4.3.2. The structure of the ARIMA models family

In general, the structure of the ARIMA models family can be represented by the following
expression (Box and Jenkins, 1970):
B 1 B y t B y t B t (14)
d
where stationary autoregressive operator B and invertible moving average operator B

are:
B 1 1 B 2 B 2 ... p B p
B 1 1 B 2 B 2 ... q B q
(15)
1 B is the differencing operator, B is the backshift operator, p is the order of the AR

component, q is the order of the MA component, d is the order of differencing (number of
differences taken to get the stationary series, which also represents the number of unit roots),
i and i are the parameters of the AR and MA operator, respectively, y t is the treated
time series, and the t is the random error. The AR and MA components represent the
dependence of the present stationary observation with respect to past observations and past
random errors, respectively (Gaynor and Kirkpatrick, 1993). The integrated component (I) is
defined by the order of differencing d, which means the degree of first differences involved
(Hanke and Wichern, 2008).
The structure given above is called the ARIMA p, d , q model, where the requirements of
stationarity and invertibility must be satisfied since this is one of the fundamental demands of
the Box-Jenkins modeling approach (Box and Jenkins, 1970). The meaning of stationarity has
already been explained. The invertibility implies that when expressing treated time series as a
function of past observations, the weights placed on them decline as we move further into the
past (the recent observation should count more heavily than an observation from the more
distant past) (Bowerman and O'Connel, 1993).

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4.4. Evaluation of the forecasting accuracy of forecasting models

The most common statistics in evaluating the forecasting accuracy of forecasting methods are
(Diaz et al, 2011): the Mean Squared Error (MSE), Mean Absolute deviation (MAD) and
Mean Absolute Percentage Deviation (MAPE). The forecasting error for the period t may be
represented by the difference between the real and estimated time series: e t y t y t ,
thus we have the following expression for the MSE and RMSE (square root of MSE), MAD
and MAPE (in percentages) (Diaz et al, 2011):
1 n
MSE e2 t , RMSE MSE
n t 1
1 n
MAD e t ,
n t 1 (16)
1 n e t
MAPE 100
n t 1 y t
In this study, RMSE, MAD and MAPE have been used to evaluate the forecasting
performances of all treated forecasting models.
5. Practical numerical results
In this section, the illustration of estimation and prediction results of used forecasting models
and their comparison will be given first. The evaluation of their forecasting accuracy will be
presented next. The calculations were carried out in Matlab, using Statistics, Econometrics
and Identification toolbox. The estimation and prediction results and conclusions about the
differences between the used forecasting models will be discussed only for the Port of Koper.
Similar conclusions can be applied to the other ports, i.e. three Italian Ports. The evaluation of
forecasting accuracy of used models will be discussed for all four treated ports.
5.1. Estimation and prediction results of used forecasting models for the case of Port of
Koper
In this chapter, the prediction results for the decomposition model will be shown first. Next,
the results for the Holt-Winters model will be provided, and finally, the results for the
ARIMA model will be presented.
5.1.1. Results for the decomposition model
Figure 3 shows the prediction results for both decomposition models, where the comparison
between the observed time series and the estimated model forecasts is provided. The

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separation between so-called "estimation interval" and "test interval" will be explained latter
for the Holt-Winters and ARIMA model. As evident from Figure 3, there are no significant
differences between the multiplicative and additive model. Both try to fit the trend of the time
series, while consistently exceeds the more sophisticated details throughout the entire time
interval. The reason could be a slightly complicated nature of the non-stationary time series,
with no highlighted seasonal component or other characteristics of time series, which would
help to achieve better performance of the decomposition models.
Figure 3 - Prediction results for both decomposition models
a) Multiplicative model for the Port of Koper b) Additive model for the Port of
Koper
5.1.2. Results for the Holt-Winters model
Figure 4 shows the prediction results for the both Holt-Winters models, where the comparison
between the observed time series and the estimated model forecasts is provided. The
separation between the "estimation interval" and the "test interval" is done in order to
distinguish between the 32 observations used to estimate the smoothing parameters and 10
observations used for testing the predictive power of both models. As it turns out, the best
values for the smoothing parameters of multiplicative smoothing equations (9) are:
* 0.75, * * 0.1 , while for the additive smoothing equations (12) are:
* 0.7, * 0.2, * 0.1.
As in the decomposition case, there are no significant differences between the multiplicative
and additive model. However,, both models fit the more sophisticated details of the time
series significantly better than in the decomposition case and are more accurate forecasters.
Naturally, there are still some essential deviations between the time series and the model
predictions noticed occasionally due to the relatively complicated nature of the time series.

76
Figure 4 - Prediction results for both Holt-Winters models
a) Multiplicative model for the Port of Koper b) Additive model for the Port of
Koper
5.1.3. Results for the ARIMA model
During the identification step of the ARIMA procedure, it was found that a first order
differencing (d = 1) is required to produce the stationary time series. During the selection
of the appropriate order of AR and MA component, different orders up to the fifth
( p, q 1, ,5 ) have been checked. After the completion of the estimation procedure for the
potential models, where the AIC and FPE criterions were calculated, it turned out that the
following ARIMA model is the most appropriate with respect to the inspection of statistical
significance (level 0.05) of estimated parameters (see (14), (15)):
1 0.9043 B 1 B y t 1 0.807 B 3 t
1
(17)
B B
10.5329 14.1212
where the values in parenthesis refer to the t-value for the coefficient estimates. Naturally, all
required procedures of the diagnostic checking step have been carried out, which confirmed
the chosen model's adequacy.
Figure 5 shows the prediction results for the ARIMA model, where the comparison between
the observed time series and the estimated model forecasts is provided. The reasons for the
separation between the "estimation interval" and the "test interval" are similar as in the case of
the Holt-Winters model. It is obvious that the ARIMA model achieves the best prediction
results with respect to the decomposition and Holt-Winters models (compare with Figures 3
and 4). Naturally, there are still some deviations noticed between the time series and the
model predictions, which can be explained by a relatively simple structure of the model (17).
Concerning the prediction results and the differences between the forecasting models for the
case of Italian Ports, similar conclusions can be drawn. It must be noted that the models

76
achieved slightly worse performance, which is probably a result of the more unsteady
behavior of the time series of Italian ports compared with the time series of the Port of Koper.
Figure 5 - Prediction results for the ARIMA model
5.2 Evaluation of forecasting accuracy of used models for all treated ports
The comparative results of forecasting accuracy of the models used for the Port of Koper and
the three Italian ports are shown in Table 3. From Table 3 it is evident that the ARIMA model
achieves the best results since it has the lowest values for all three performance measures
regardless of which port is observed. The multiplicative Holt-Winters model appears to be the
second best model, while the additive Holt-Winters model achieves slightly worse results than
the multiplicative Holt-Winters model. On the other hand, both decomposition models seem
to achieve the worst performance since all performance measures reach the highest values for
all the treated ports. The final conclusion is therefore that the ARIMA model outperformed
the other forecasting models and can be treated as a relatively reliable method for forecasting
the corresponding throughput in observed North Adriatic Ports.
Table 3 Performance of selected models for forecasting container throughput in North

Adriatic Ports
Port Forecasting model MAD MAPE RMSE
Classical decomposition (Multiplicative) 21,03 7,19 27,75
Classical decomposition (Additive) 21,03 7,20 27,79
Koper Holt-Winters (Multiplicative) 11,53 4,49 14,22
Holt-Winters (Additive) 12,13 4,78 15,46
ARIMA 7,36 2,80 9,14
Ravenna Holt-Winters (Multiplicative) 18,67 10,29 29,63
ARIMA 11,94 7,06 17,36
Triest
Holt-Winters (Multiplicative) 23,83 12,84 29,61

76
ARIMA 15,55 7,91 22,56

Holt-Winters (Multiplicative) 24,75 9,58 37,96
Venice
ARIMA 18,26 7,09 26,66
5.3 The Sensibility Analysis and the Robustness of the Forecasting Results
The Sensibility analysis has shown that the forecasting results do not vary significantly from
the presented results if the estimation interval has a sufficient range in order to identify as
much time series dynamics as possible. In practice, this means that the results do not vary
significantly if the estimation interval has a range of at least 25 quarters or more. If the
estimation interval is smaller than 25 quarters, the forecasting results start to change
gradually.
6. Conclusion
A comparison of models for forecasting the container throughput time series is presented and
applied to the Port of Koper, Ravenna, Trieste and Venice in the North Adriatic Sea. The
models used are based on the classical decomposition, Holt-Winters, and ARIMA modeling
approach.
The methodologies of designing the forecasting models are briefly discussed. The models are
created to forecast the throughput of 20 ft volume containers, for which the historical data set
of 42 quarterly observations in a 10-year period is available. The prediction results are
presented for the Port of Koper, where the ARIMA model achieved the best performance,
while both Holt-Winters models outperformed the decomposition models. With regard to
differences between the predictive power of models for forecasting the throughput in Italian
Ports, similar conclusions can be applied as for the Port of Koper.
Comparative results of forecasting accuracy of used models for the Port of Koper and the
three Italian ports are presented in the form of performance measures MAD, MAPE and
RMSE. The conclusions based on these measures also suggest that the best forecasting
performance for all ports can be achieved by means of ARIMA model, while the Holt-
Winters models seem to be satisfactory forecasters. On the other hand, the decomposition
models take the highest values of performance measures since they fail to forecast more
sophisticated details of corresponding time series.
Due to the lack of scientific papers focusing on forecasting in NAPA ports, we believe that
this is one of the most important contributions of this study. In addition, the findings could
serve as a useful indicator for the authorities of the Port of Koper showing that the ARIMA
models are reliable for forecasting the container cargo throughput and supporting managerial

76
decisions. Finally, we believe that the most important contribution of this paper is the
conclusion that, in times of the economic crisis, the former leading role of certain simpler
forecasting models such as decomposition models is no longer self-evident, which means that
they should be used with some caution.
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IAME 2014 Conference Norfolk VA USA

Paper ID 76, ACCEPTED FOR PRESENTATION & REVISED

A comparison of Methods for Forecasting the Container

Dejan Dragan*, Tomaz Kramberger, Marko Intihar

In today's globalization and sharpening conditions, containerization plays an extremely

Keywords: Container throughput, Forecasting, Holt-Winters method, Classical

For cargo throughput forecasts, quantitative forecasting approaches related to statistical

IAME 2014 Conference, July 15-18 Norfolk, VA, USA 2

IAME 2014 Conference, July 15-18 Norfolk, VA, USA 3

forecasting models (classical decomposition model, trigonometric regression model,

3. The description of the ports and the historical data

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Figure 1 North Adriatic Ports

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Source: NAPA, 2014.

3.1 The nature of cargo and historical data

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4. Methodology for forecasting models

4.1 Classical decomposition model

4.1.1 Multiplicative decomposition model

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4.1.2 Additive decomposition model

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4.2. Holt-Winters exponential smoothing model

4.2.1. Multiplicative Holt-Winters model

IAME 2014 Conference, July 15-18 Norfolk, VA, USA 9

where y t is a time series at time t, S t is a seasonal pattern, I t is an irregular

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4.2.2. Additive Holt-Winters model

4.3. The Autoregressive integrated moving average model (ARIMA)

4.3.1. The Box-Jenkins methodology

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1. Step: Preliminary (tentative) identification process observed data are used to

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4.3.2. The structure of the ARIMA models family

where stationary autoregressive operator B and invertible moving average operator B

1 B is the differencing operator, B is the backshift operator, p is the order of the AR

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4.4. Evaluation of the forecasting accuracy of forecasting models

5. Practical numerical results

5.1.1. Results for the decomposition model

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Figure 3 - Prediction results for both decomposition models

5.1.2. Results for the Holt-Winters model

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Figure 4 - Prediction results for both Holt-Winters models

5.1.3. Results for the ARIMA model

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Figure 5 - Prediction results for the ARIMA model

Table 3 Performance of selected models for forecasting container throughput in North

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ARIMA 15,55 7,91 22,56

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MAKRIDAKIS, S. G., WHEELWRIGHT, S. C. and HYNDMAN, R. J., Forecasting:

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