INDIVIDUAL ASSIGNMENT TASK

“FORECASTING”

Task No 19

Harlen’s Industries, has a simple forecasting model. The following eight weeks show the
forecast (based on last year) and the demand that actually occurred.

Table 1 Forecast demand and actual demand from Harlen’s Industries

Forecast Actual
Week demand demand
1 145 142
2 144 138
3 135 144
4 145 154
5 135 174
6 145 164
7 145 180
8 147 200
Question A : Compute the MAD of forecast Errors.

∑𝑛𝑖=1 𝑆𝑢𝑚 𝑜𝑓 𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛

𝑀𝐴𝐷 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 (𝑛)

To compute the MAD of forecast errors, there are few step that must be followed.

 Calculate the Deviation between Actual demand and Forecast demand (Actual Demand
– Forecast Demand) (i)
 Determine the Absolute Deviation (ii)
 Calculate the summary absolute deviation (iii)

Forecast Actual
Week demand demand Deviation RSFE Abs Deviation Sum Abs Dev MAD
1 145 142 -3 -3 3 3 3
2 144 138 -6 -9 6 9 4.5
3 135 144 9 0 9 18 6
4 145 154 9 9 9 27 6.75
5 135 174 39 48 39 66 13.2
6 145 164 19 67 19 85 14.16667
7 145 180 35 102 35 120 17.14286
8 147 200 53 155 53 173 21.625
SUM 1141 1296 173
AVERAGE 142.625 162 21.625
From the calculation, The MAD of forecast errors is 21.625.
B. Using RSFE, compute the tracking signal.

Tracking Signal (TS) = MAD / RSFE

Forecast Actual Abs Sum Abs

Week demand demand Deviation RSFE Deviation Dev MAD TS
1 145 142 -3 -3 3 3 3 -1
2 144 138 -6 -9 6 9 4.5 -2
3 135 144 9 0 9 18 6 0
4 145 154 9 9 9 27 6.75 1.333333
5 135 174 39 48 39 66 13.2 3.636364
6 145 164 19 67 19 85 14.16667 4.729412
7 145 180 35 102 35 120 17.14286 5.95
8 147 200 53 155 53 173 21.625 7.16763
SUM 1141 1296 173
AVERAGE 142.625 162 21.625

The tracking signal for the forecast is 7.167

C. Based on your answers to parts (a) and (b), the comment on Harlen’s method of forecasting
is untrustworthy, because the mean absolute deviation is high and also the value of tracking
signal is too high, up to 7.16. Acceptable range for tracking signal sometimes in ±3 MAD.
Task No 22

Historical data

Actual
Month
demand

1 52
2 55
3 57
4 67
5 73
6 75
7 76
8 77
9 77
10 79
11 80
12 82

A. Calculate the simple three month moving average forecast for periods 4 – 12

Simple moving average :

Simple three month moving average = (A(t-1) + A(t-2) + A(t-3))/3

Actual
Month Forecast
demand

1 52
2 55
3 57
4 67 55
5 73 60
6 75 66
7 76 72
8 77 75
9 77 76
10 79 77
11 80 78
12 82 79
B. The Weighted three month moving average. Weights 0.40, 0.30, 0.30

Ft = (52 x 0.3) + (55 x 0.3) + (57 x 0.4)

Actual
Month Ft
demand

1 52
2 55
3 57
4 67 55
5 73 60
6 75 66
7 76 72
8 77 75
9 77 76
10 79 77
11 80 78
12 82 79

C. Single Exponential smoothing forecast for periods 2 -12. Initial Forecast (F1 = 62) and
alpha = 0.20

Forecast with
Actual
Month Exponential
demand
smoothing
1 52 62
2 55 60
3 57 59
4 67 59
5 73 60
6 75 63
7 76 65
8 77 67
9 77 69
10 79 71
11 80 72
12 82 74
D. Calculate the exponential smoothing with trend component forecast for periods 2 -12

Initial forecast (T1) = 1.8 and Initial exponential smoothing forecast F1 = 61. Alpha 0.20 and
Beta 0.3

Exponential with
Actual
Month trend component Ft Tt
demand
forecast
1 52 63 61 1.8
2 55 62 60.64 1.152
3 57 61 60.4336 0.74448
4 67 61 60.34246 0.4937952
5 73 63 62.06901 0.863619648
6 75 66 64.9461 1.467662028
7 76 70 68.13101 1.982836209
8 77 74 71.29108 2.336005382
9 77 77 74.30167 2.538380398
10 79 79 76.87204 2.547977586
11 80 82 79.33601 2.522776682
12 82 84 81.48703 2.411249358

E. The Mean Absolute deviation (MAD) for the forecasts, by each techniques

To compute the MAD of forecast errors, there are few step that must be followed.

 Calculate the Deviation between Actual demand and Forecast demand (Actual Demand
– Forecast Demand) (i)
 Determine the Absolute Deviation (ii)
 Calculate the summary absolute deviation (iii)
∑𝑛
𝑖=1 𝑆𝑢𝑚 𝑜𝑓 𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛
 𝑀𝐴𝐷 = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑃𝑒𝑟𝑖𝑜𝑑 (𝑛)
From the calculation of MAD for each technique forecasting, I prefer choose exponential with
trend’s technique because this technique have a smallest MAD value. It’s mean the error ratio
for this technique is small, and the forecast data is trustable.

TASK 25.

Sales Data for 2 years

Period Period Month SALES

1 JAN - FEB 110

2 MAR - APR 104
3 MAY - JUN 149
4 JUL - AUGUST 169
5 SEPT - OKT 118
6 NOV - DEC 85
7 JAN - FEB 100
8 MAR - APR 97
9 MAY - JUN 158
10 JUL - AUGUST 176
11 SEPT - OKT 119
12 NOV - DEC 101

A. Plot the data

Sales
200
180
160
140
120
Sales

100
80
60
40
20
0
1 2 3 4 5 6 7 8 9 10 11 12
B. A simple linear regression model to the sales data

X Y tXy t^2 y^2 Y

1 110 110 1 12100 121.4872
2 104 208 4 10816 121.9138
3 149 447 9 22201 122.3403
4 169 676 16 28561 122.7669
5 118 590 25 13924 123.1935
6 85 510 36 7225 123.62
7 100 700 49 10000 124.0466
8 97 776 64 9409 124.4732
9 158 1422 81 24964 124.8998
10 176 1760 100 30976 125.3263
11 119 1309 121 14161 125.7529
12 101 1212 144 10201 126.1795
SUM 78 1486 9720 650 194538
Average 6.5 123.8333 810 54.16666667 16211.5

b = 0.42
a = 121.06
Y = 121.06 + 0.42 (X)
C. Multiplicative seasonal index factor
AVERAGE OF
Period Seasonal Deseasonal
Period SALES THE SAME t^2 t X yd Y
Month Factor Demand
PERIOD
1 JAN – FEB 110 105 0.847913863 129.7301587 1 129.7302 122.193
2 MAR – APR 104 100.5 0.811574697 128.145937 4 256.2919 122.4912
3 MAY – JUN 149 153.5 1.239569314 120.2030402 9 360.6091 122.7895
JUL –
4 AUGUST 169 172.5 1.393001346 121.3207729 16 485.2831 123.0877
5 SEPT – OKT 118 118.5 0.956931359 123.3108298 25 616.5541 123.386
6 NOV – DEC 85 93 0.751009421 113.1810036 36 679.086 123.6842
7 JAN – FEB 100 0.847913863 117.9365079 49 825.5556 123.9825
8 MAR – APR 97 0.811574697 119.5207297 64 956.1658 124.2807
9 MAY – JUN 158 1.239569314 127.4636265 81 1147.173 124.579
JUL –
10 AUGUST 176 1.393001346 126.3458937 100 1263.459 124.8772
11 SEPT – OKT 119 0.956931359 124.3558368 121 1367.914 125.1755
12 NOV – DEC 101 0.751009421 134.4856631 144 1613.828 125.4737

Seasonal Factor for Period:

1 (Jan – Feb) = 0.84
2 (Mar – Apr) = 0.81
3 (May – Jun) = 1.239
4 (Jul - Ags) = 1.39
5 (Sept - Okt) = 0.95
6 (Nov – Dec) = 0.75

D. Forecast Demand for next year period

Used data analysis for regression in Ms. Excel, we can found the (a) and (b)

Y = 121.89 + 0.29 x 13
Y = 125.7719
Forecast in seasonal = Y x Index factor
Forecast for next year :
next period
X Y Index Factor Forecast
13 JAN – FEB 125.7719 0.847913863 106.6437792
14 MAR - APR 126.0702 0.811574697 102.3153825
15 MAY - JUN 126.3684 1.239569314 156.6424482
16 JUL - AUGUST 126.6667 1.393001346 176.4468764
17 SEPT - OKT 126.9649 0.956931359 121.4967359
18 NOV - DEC 127.2632 0.751009421 95.57585615