Question

Question: Use the first-order exponential smoothing model with α = 0.2 to forecast for these data and for the first six months of the third year. Compute MSD/E, MAD, MAPE, and Bias.

Month (t)	Demand A(t)
1	148
2	125
3	78
4	53
5	25
6	29
7	9
8	68
9	84
10	110
11	147
12	120
13	147
14	109
15	96
16	70
17	42
18	36
19	34
20	28
21	71
22	102
23	103
24	144

Answer 1

Exponential smoothing forecast for period t, F(t) = alpha*Actual (t-1) + (1-alpha)*Forecast (t-1)

where alpha is smoothing constant

Bias indicates on an average basis, whether the forecast is too high (negative bias indicates over forecast) or too low (positive bias indicates under forecast)

Bias = Summation (Error)/ n

Mean Absolute Deviation (MAD) indicates on an average basis, how many units the forecast is off from the actual data

MAD = Summation (|Error|)/ n

Mean Absolute Percent Error (MAPE) indicates on an average basis, how many percent the forecast is off from the actual data

MAPE = Summation ((|Error|)/ Actual)*(100%/n)

Mean Squared Deviation/ Error (MSD/E) is a forecast error measure that penalises large errors proportionally more than small errors

MSD/E = Summation (Error²)/ n

Below excel show the calculations

Hence, the final solution is :

Forecast for 6 months in 3rd year-

90.3

72.3

57.8

46.2

37.0

29.6

Bias = -12.5

MAD= 42.9

MAPE= 111.7%

MSD/E = 2453.2

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