The purchasing agent for a hospital has collected data over the last five years on average monthly
Question:
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She believes that an accurate forecast of price would help improve the timing of her buying. Using the oldest four years of data as the base data and saving the most recent data (last year) for checking the forecast accuracy, do the following:
a. Plot the data on a graph. What important observations can you make about the data that would be useful to forecasting?
b. Construct a classic time series decomposition forecasting model based on two full years of data (years 2 and 3) and compute the error of the forecast (SF) for the last full year.
c. Construct an exponential smoothing model (α = 0.14, β = 0.01, and γ = 0.7) with level, trend, and seasonal components, and compute SF for the last year.
d. Create a weighted average model that combines both model types.
Step by Step Answer:
a See the plot in Figure 81 given below It shows that there is a seasonal component with a very slight trend to the data as well as some random or unexplained variation FIGURE 81 Plot of time series d...View the full answer
Business Logistics Supply Chain Management
ISBN: 978-0130661845
5th edition
Authors: Ronald H. Ballou
