Question

The following table shows the actual demand observed over the last 11 years 

Year	1	2	3	4	5	6	7	8	9	10	11
Demand	7	9	5	10	13	7	13	14	9	11	8

This exercise contains only parts b, c, and d.

b) Using the 3-year moving average, provide the forecast from periods 4 through 12 (round your responses to one decimal place). 

Year	4	5	6	7	8	9	10	11	12
Forecast

c) Using the 3-year weighted moving average with weights 0.20. 0.35. and 0.45. using 0.45 for the most recent period provide the forecast from periods 4 through 12.

Year	4	5	6	7	8	9	10	11	12
Forecast

d) Mean absolute deviation for the forecast developed using the 3-year moving average is 2 86 and for the 3-year weighted moving average is 3.08. Based on this information the better forecast is achieved using the approach

Answer 1

b) Using three year moving average,forecast from periods 4 through 12 are :

• Period 4 = (7+9+5) / 3 = 7
• Period 5 = (9+5+10) / 3 = 8
• Period 6 = (5+10+13) / 3 =9.3
• Period 7 = (10+13+7) / 3 = 10
• Period 8 = (13+7+13) / 3 = 11
• Period 9 = (7+13+14) / 3 = 11.3
• Period 10 = (13+14+9) / 3 = 12
• Period 11 = (14+9+11) / 3 =11.3
• Period 12 = (9+11+8) / 3 = 9.3

c) Using 3-year weighted moving average the forecast from period 4 through 12 are:

• Period 4 = (7X0.20) + (9X0.35) + (5X0.45) = 6.8
• Period 5 = (9X0.20) + (5X0.35) + (10X0.45) =8.05
• Period 6 = (5X0.20) + (10x0.35) + (13X0.45) =10.35
• Period 7 = (10X0.20) + (13X0.35) + ( 7X0.45) = 9.7
• Period 8 = (13X0.20) + (7X0.35) + (13X0.45) =10.9
• Period 9 = (7X0.20) + (13x0.35) + (14x0.45) =12.25
• Period 10 = ( 13X0.20) + (14X0.35) + (9X 0.45) =11.55
• Period 11 = (14X0.20) + (9X0.35) + (11X0.45) = 10.9
• Period 12 = (9X0.20) + (11X0.35) + (8X0.45) = 9.25

d) Based on the given information the better forecast is achieved using the three year moving average approach as it yields the lower Mean Absolute Deviation.