(a) Explain the difference between a moving average and single exponential smoothing forecasting model. [4 marks]

(b) Managers at Starbucks (case that we have covered in the class) have been running four forecasting models across 5 Distribution Centers (DCs). The results are provided below. Which model is the most accurate? Why? What other steps would you take to improve the accuracy of forecasting?

3-week Moving Average MAD MAPE DC1 11.44 0.288 DC2 10.08 0.243 DC3 19.85 0.42 DC4 10.64 0.223 DC5 9.87 0.214 MAD 9.58 5-week Moving Average 11.17 10.63 0.281 0.256 18.45 0.391 12.37 0.26 MAPE 0.207 10.76 9.85 17.77 10.51 8.57 Exponential MAD smoothing, a = 2 MAPE 0.271 0.237 0.376 0.221 0.185 MAD 11.87 10.55 18.32 9.84 9.57 Exponential smoothing, a = .4 MAPE 0.299 0.254 0.388 0.207 0.207 3-week Moving Average MAD MAPE DC1 11.44 0.288 DC2 10.08 0.243 DC3 19.85 0.42 DC4 10.64 0.223 DC5 9.87 0.214 MAD 9.58 5-week Moving Average 11.17 10.63 0.281 0.256 18.45 0.391 12.37 0.26 MAPE 0.207 10.76 9.85 17.77 10.51 8.57 Exponential MAD smoothing, a = 2 MAPE 0.271 0.237 0.376 0.221 0.185 MAD 11.87 10.55 18.32 9.84 9.57 Exponential smoothing, a = .4 MAPE 0.299 0.254 0.388 0.207 0.207