Forecasting Methods
Every day managers must make decisions on future demands for their product or service. Knowing the future demand for your product is important so that staffing levels can be adjusted or more equipment and raw material procured. However, future demand is unknown, so managers turn to forecasts to make good estimates of future demand for their product or service.
Now put yourself in the shoes of the plant manager. This chart provides historical data for the past demand for your product. Your task is to apply the naïve, moving average, exponential smoothing, and trend methods of forecasting and determine which method is the most accurate.
| Week | Demand |
|---|---|
| Week 1 | 55 |
| Week 2 | 75 |
| Week 3 | 65 |
| Week 4 | 70 |
| Week 5 | 80 |
| Week 6 | 85 |
| Week 7 | 75 |
| Week 8 | 80 |
| Week 9 | 90 |
| Week 10 | 75 |
Use the Excel OM plugin and the data to run the forecast using naive, weighted moving average, exponential smoothing, and trend projection (without exponential smoothing) methods. Use this information.
- Weighted moving averages method – use two periods with 0.1 and 0.4 as the weights.
- Exponential smoothing method – use an alpha of 0.1.
After you run the data, determine which method provided the most accurate forecast and explain your reasoning.
Submit your spreadsheet and include your selected method and explanation on the spreadsheet. Save your assignment using a naming convention that includes your first and last name and the activity number (or description). Do not add punctuation or special characters.
