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Exponential Smoothing Example |
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| Ft |
new forecast |
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| Ft-1 |
previous period’s forecast |
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| a |
smoothing (weighting) constant |
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| At-1 |
previous period actual or demand |
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| At-1 minus Ft-1 is the forecast error |
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| Smoothing constant |
.05 to .5) |
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| higher constant – more weight on recent data |
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| lower constant – more weight on past data |
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| constant of 1 = naïve forecast |
(current forecast equals previous period demand) |
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| Formula: |
Ft=Ft-1+alpha(At-1 – Ft-1) |
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Current Forecast = previous period forecast + alpha (forecast error) |
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Forecast error is the actual demand minus the previous forecast |
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