Question

In: Math

Siberian Charter Adventures is an independent Canadian company focused on providing unique charter tours to Siberia....

Siberian Charter Adventures is an independent Canadian company focused on providing unique charter tours to Siberia. The company has averaged between 1,000 and 1,500 tourists per month, and the operations manager wants to develop a forecast model to aid in planning. The operations manager has provided you with historical tourist data for the 24 months in 2014 and 2015.

  1. Download the accompanying data file (MGSC369_R6_A4_datafile) and prepare a set of forecasts for each of the following three methods. Please read the instructions in the ExcelTM file carefully before you begin. Note that the forecasts can be created using Microsoft Excel, and you should submit your spreadsheet with your assignment for grading

Month

Actual Demand (# of Tourists)

Jan-14

1344

Feb-14

1339

Mar-14

1415

Apr-14

1213

May-14

1412

Jun-14

1318

Jul-14

1018

Aug-14

1250

Sep-14

1176

Oct-14

1062

Nov-14

1137

Dec-14

1391

Jan-15

1192

Feb-15

1425

Mar-15

1320

Apr-15

1256

May-15

1288

Jun-15

1420

Jul-15

1478

Aug-15

1198

Sep-15

1203

Oct-15

1002

Nov-15

1246

Dec-15

1339

a) Three-month moving average

b) Exponential smoothing based on what you believe to be an appropriate alpha constant. Provide a brief justification

c) Trend-adjusted exponential smoothing based on what you believe to be appropriate alpha and beta constants. Provide a brief justification for your choices.

  1. Complete the following error summary table of the three forecasts, and then comment on the results. Identify which forecast method you believe the company should adopt.

MAD

MSE

MAPE

three-month moving average

Exponential smoothing

Trend-adjusted exponential smoothing

Solutions

Expert Solution

MAD MSE MAPE
MOVING AVERAGE
79.22146636
22811.31217
9.8093%
EXPONENTIAL SMOOTHING 109.67695 19361.88563 9.0556%
TREND ADJUSTED SMOOTHING
111.568022
21258.756
9.1412%

For exponential smoothing take alpha=0.2761 as the actual values are varying greatly.

For Trend Adjusted exponential smoothing take alpha=0.2761 and beta=0.1 .Here we can notice that MAPE from trend adjusting is more than exponential smoothing and hence to minimize the MAPE error take beta=0.

Initially beta=0.1 was taken to give weight to the trend.

THREE MONTH MOVING AVERAGE

EXPONENTIAL SMOOTHING WITH APLHA=0.27

EXPONENTIAL TREND SMOOTHING WITH APLHA=0.27 and beta=0.1


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