Question: Problem 1 A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 85% capacity; actual

Problem 1

A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 85% capacity; actual usage was 89%. A smoothing constant of .12 is used.

Prepare a forecast for September.

Assuming actual September usage of 94%, prepare a forecast for October.

The concept used to solve the problem Exponential Smoothing

Definition: Each new forecast is based on the previous forecast plus a percentage of the difference between that forecast and the actual value of the series at that point.

Formula: F_{t =}F_{t- 1} + (A_{t 1} F_t-1)

F = Forecast

A = Actual

F_t = Forecast for period t

F_{t 1} = Forecast for the previous period (i.e., period t 1)

The = Smoothing constant (percentage)

A_{t 1}= Actual demand or sales for the previous period

Excel Example:


	Smoothing Constant	0.12

	Month	Actual	Forecast
	August	89%	85%
a.	September
b.	October

September forecast =August forecast+ *(Actual August demand-August forecast)

September forecast =

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