Chapter 3 Forecasting: Discussion 1

Problem 1 An electrical contractor’s records during the last five weeks indicate the number of
job requests:

Week: 1 2 3 4 5
Requests: 20 22 18 21 22

Predict the number of requests for week 6 using each of these methods:
a. Naïve.
b. A four-period moving average
c. Exponential smoothing with   .30. Use 20 for week 2 forecast.

Problem 2 National Scan, Inc., sells radio frequency inventory tags. Monthly sales for a seven- month
period were as follows:

Month Sales ( 000 units)

Feb. ........................ 19
Mar. ....................... 18
Apr. ........................ 15
May ........................ 20
Jun. ........................ 18
Jul. ......................... 22
Aug. ....................... 20

Forecast September sales volume using each of the following:

a. A five- month moving average.
b. Exponential smoothing with a smoothing constant equal to .20, assuming a March forecast of 19( 000).
c. The naive approach.
d. A weighted average using .60 for August, .30 for July, and .10 for June.

Problem 3 A manager of a store that sells and installs spas wants to prepare a forecast for
January, February, and March of next year. Her forecasts are a combination of trend and
seasonality. She uses the following equation to estimate the trend component of monthly
demand: Ft  70  5t , where t=0 in June of last year. Seasonal relatives are 1.1 for January, 1.02
for February, and .95 for March. What demands should she predict?

1
Answer Key
1. a. 22
22  18  21  22
b.  20.75
4
c. F3 = 20 + .30(22 – 20) = 20.6
F4 = 20.6 + .30(18 – 20.6) = 19.82
F5 = 19.82 + .30(21 – 19.82) = 20.17
F6 = 20.17 + .30(22 – 20.17) = 20.72
15  20  18  22  20
2. a. MA5   19
5
b) Month Forecast = F(old) + .20[Actual – F(old) ]
April 18.8 = 19 + .20[ 18 – 19 ]
May 18.04 = 18.8 + .20[ 15 – 18.8 ]
June 18.43 = 18.04 + .20[ 20 – 18.04 ]
July 18.34 = 18.43 + .20[ 18 – 18.43 ]
August 19.07 = 18.34 + .20[ 22 – 18.34 ]
September 19.26 = 19.07 + .20[ 20 – 19.07 ]
c) 20
d) .6 (20) + .3(22) + .1(18) = 20.4

3. Yt = 70 + 5t
t= 0 (June of last year)
t= 1 (July of last year)
t= 7 (January of this year)
t= 8 (February of this year)
t= 9 (March of this year)
t= 19 (January of next year)
t= 20 (February of next year)
t= 21 (March of next year)
YJan = 70 + (5)(19) = 165
YFeb. = 70 + (5)(20) = 170
YMar. = 70+ (5)(21) = 175
Forecast = (Trend) * (Seasonal Relative)
Month Trend * Seasonal Relative Forecast (Trend * Seasonal Rel)
January 165 * 1.10 181.5
February 170 * 1.02 173.4
March 175 * .95 166.25