Southern Illinois University

Edwardsville

Executive Summary Report

Lab Assignment #1
Forecasting Methods
IME-483 Production Planning And Control
By
Sumanth Bhavisetty
&
Khazi Mohammed Younus Abdul Ghani
Due Date: 09/29/2015
Team-D

Introduction:
The focus of the project is to determine the forecast of the given data using Excel and VBA, the very
first step is to figure out how to calculate forecasts in Excels form without any manual calculations and then
provide the macros code of the excel calculations to the VBA format. According to the requirement of project,
demand is to be estimated using the following four methods, Moving Average Method, Exponential Smoothing
Method, Holts Method and Winters Method followed by calculating forecast errors for each method
respectively. The final step is to compare of all the above mentioned procedures using Mean Square Error
(MSE) method to identify the forecast that is most accurate to forecast demand. Main purpose is to find the
best method by comparing each method with its respective Minimum Square Error (MSE) value.

Purpose of the application:

The main objective of this project is to generate an interface application that provides ease of use for the
users to forecast demand in a simple way by entering the available data. To create this user interface, the
calculation part is done on Excel worksheets, this is where all the calculations work is done. Visual Basic
Application (VBA) is used to create an outer skin or interface over the excel worksheets to achieve desired
output, by doing simple tasks such as entering the data and to toggle between different methods by just clicking
on the buttons.

Methodology:
As mentioned above, 4 different methods are used to forecast demand based on set of given data. This is
a recorded data for demand per time period from previous years. Moving Average method is a simple and basic
calculation process to forecast demand. In this, the average of demand data is taken for desired time periods.

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Xt

i 1

t i

For moving average the equation used for the calculation is:

This is a one step ahead forecast, this process fails in case of predicting demand for multi-step ahead
forecast. To refine this gap in forecasting we use Exponential Smoothing method. In this method, smoothing
constant () is used to forecast demand in a finer pattern. The following equations are used in Exponential
smoothing to forecast demand
X t X t 1 ( X t 1 X t 1 )

Welcome Page:

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Figure: 1 Welcome Page

This welcome page which explains the use of forecasting tools and give a brief info to user. It has three
command buttons Demo, Start. End. The demo button helps the user to use the historical data of the
project and helps to provide new data to it to predict the demand in future based on given data.

Historical Data:
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Figure: 2 Historical Data

After starting the program, the user will be able to input historical data which he/she needs to forecast.

Comparing Method Sheet:

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Figure: 3 Comparing Method

In this page one can choose the forecasting method which they want to apply based on data with consideration
of different parameters which are involved in calculation. In addition to this, visual basic programming (VBA)
is used to evaluate the four methods and determine the best forecasting method based on which one resulted in
the lowest mean squared error (MSE).
The user is also able to view single graphs of the forecasting results or a compiled graph of all four methods as
shown below.

Moving average:
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Figure: 4Moving Average

Exponential Smoothing:
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Figure: 5 Exponential Smoothing

For Exponential Smoothing the equation used for the calculation is:

Holt's Method with Trends:

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Figure: 6 Holts Method

S t Dt (1 )( S t 1 Gt 1 ) Gt ( St S t 1 ) (1 )Gt 1 Ft ,t St Gt

For Holt's Method the equations

used for the calculations is:

To initial the calculations a slope and intercept excel function including the for the demand and the periods was
used to find

S0 and G0

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Winters Method with Seasonality:

Figure: 7 Winters Method

Ft ,t x ( S t xGt )ct x N

Y
S t t
ct N

(1 )( S t 1 Gt 1 )

Gt [ S t S t 1 ] (1 )Gt 1

The equations used for

the calculations is:

To calculate

ct

we used the way that explained in the class.

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S0 & G0 is taken the same as Holt's Method then I did the calculation for all F t

equation Ft,t+x = St +xGt

by dividing

Dt / Ft

for regression from the

than take the average for the periods that respectively meet

on the seasons then normalizing the values by the equation.

Best Method:

Figure: 8 Best Method

In this page, you are able to compare the method and based on the MSE can have an accurate comparison as
which one has the minimum error and reliable calculation.

Y (t ) Y (t )
N

MSE

t 1

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The Equations used for MSE calculation was

Conclusion:
Holts Method differentiates from Moving Average and Exponential Smoothing by simply adding the trend
factor inside forecasting. While Moving Average and Exponential Smoothing methods have only alpha
smoothing, it has also beta smoothing factor. Winters Method, above all; has also seasonal index which will
lead more precise forecasts (gamma).After using our program, expectedly, winters method provided the
minimum MSE. Therefore, winters Method is the best method in these four methods.

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