Question

You are the owner of a franchise that sells mobile phones.   Below is a chart showing sells for the past 10 weeks. You want to start forecasting future sells but not sure which forecast method is best. To help you with this decision you decided to use the data below to calculate forecasts using 3 different methods (moving average, weighted moving average and exponential smoothing).   You will determine which of the forecasts is best using the MAPE calculation to see which of the forecast is most accurate.   Use the outline below to do your analysis.

Week	Mileage
1	48
2	52
3	59
4	58
5	57
6	54
7	56
8	60
9	59
10	62

                       

1. Calculate a 2 week moving average forecast.
2. Calculate a 3 week weighted moving average with weights of 3, 2, 1 with the highest weights given to the most recent data to make them more significant.
3. Calculate the exponential smoothing for the above data using smoothing constants of .1, .3 and .5.   Use 40 as the forecast for week 1.
4. Calculate the MAPE for each of the forecasts.
5. Which of the five forecast methods (2 week, 3 week weighted moving average, exponential smoothing of .1, .3 or .5) is best based on the MAPE calculation.

Answer 1

ANSWER

1) Forecast of a week with 2 period moving average = average of last 2 periods milege

2) Weighted Forecast of a week = (3*sales of most recent week+ 2*sales of next most recent week+1*sales of third recent week)/6

3) the formula to be used in Exponential smoothing is

F_t+1= alpha*A_t + (1-alpha) F_t

A_t means Actual demand of t'th week

if you want to find out the Forecast through exponential smoothing= forecast of 3rd week = alpha*actual demand of 2nd week+(1-alpha) *forecast demand of 2nd week

remember forecast of 1st month is 40

Week	Mileage	2 period moving average	3 period weighted Forecast method	Forecast exponential smoothing with constant 0.1	Forecast exponential smoothing with constant 0.3	Forecast exponential smoothing with constant 0.4
1	48			40.0	40.0	40.0
2	52			40.80	42.40	44.00
3	59	50		41.92	45.28	48.00
4	58	55.5	54.83	43.63	49.40	53.50
5	57	58.5	57.33	45.07	51.98	55.75
6	54	57.5	57.67	46.26	53.48	56.38
7	56	55.5	55.67	47.03	53.64	55.19
8	60	55	55.50	47.93	54.35	55.59
9	59	58	57.67	49.14	56.04	57.80
10	62	59.5	58.83	50.12	56.93	58.40

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