FORECASTING NOTES 1. Plot the demand given > chart > line. 2. Decide on the appropriate method: a. Static Method - Use it if data exhibits both trend and seasonality; assuming static L,T, & S. b. Adaptive Method - Use it if asked to use an adaptive method: i. Moving average ii. Simple exponential smoothing iii. Holt's - used when having Trend, no seasonality iv. Winter's - used for Trend & Seasonality P.S. Moving average & exponential smoothing you can do it from slides & the example done in class, use them when demand has only level (no trend nor seasonality). 3. Holt's: a. Do regression between the Demand (Y) & Period (X) to get Lo, To, then create cells for Alpha & Beta. Note that Lo is the Intercept, and To is X Variable 1. b. L1 = 1 1 c. T1 = 1 1 0 d. F1 = To + Lo , then drag; for the new Ft : remember (L +2T , L+3T ; check example in class) e. At = ABS (Ft - Dt) f. Et^2 = At^2 g. MAD = Average (At) h. MSE = Average (Et^2) i. Use solver to minimize \"MAD or MSE\" as requested by changing & i. Constraint for , , 0 ; , 1 When having Trend & Seasonality > use Winter Method so do the static method 1st to get to Winters 4. Static Method: a. Deseasonalize Demand: If p is odd: . , then drag, and remove (p/2 - 0.5) cells from the start and end. If p is even> = , then drag, and remove (p/2) cells from the start and end. Example 1(even): 12 Example 2(even): 4 b. Regression: them. ; ( -> Y, demand) and (t > x , period): To find L & T , then copy c. Find All d. , = & drag e. = Average, drag p cells, then copy the values f. , & drag g. h. i. , smaller is better. , smaller is better. j. MSE = Average ( 5. Winter: Used when having Trend & Seasonality. 1) From Static > copy values for L, T, & 1st period for St. to have Lo , To, S1...p. 2) Create cells for Alpha, Beta, Gamma 3) L1 = 1 4) T1 = 1 5) Sp+1 = 1 1 1 6) F1 = (Lo + To) * S1 a. For the last period the new forecast i. Ft = (L + T) St ii. Ft = (L + 2*T) St iii. Ft = (L + 3*T) St 7) At = ABS (Ft - Dt) 8) At^2 = At^2 9) MAD = Average (At) 10) MSE = Average (At^2) 11) Use solver to min requested either MAD or MSE a. Cst: , , 0 ; , , 1 \f