Consider the following time series:Period 1 2 3Demand 15 24 26Forecast the demand for period 2 using exponential smoothing with W (smoothing coefficient) = 0.4. Express your answer without rounding.
Question
Consider the following time series:Period 1 2 3Demand 15 24 26Forecast the demand for period 2 using exponential smoothing with W (smoothing coefficient) = 0.4. Express your answer without rounding.
Solution
To forecast the demand for period 2 using exponential smoothing, we first need to understand that the formula for exponential smoothing is:
Ft+1 = W*Dt + (1-W)*Ft
Where: Ft+1 = Forecast for the next period W = Smoothing coefficient (given as 0.4) Dt = Demand in the current period Ft = Forecast for the current period
However, for period 1, there is no previous forecast available. In such cases, it's common to use the actual demand of period 1 as the forecast for period 1. So, F1 = D1 = 15.
Now, we can calculate the forecast for period 2 (F2) using the given formula:
F2 = W*D1 + (1-W)F1 F2 = 0.415 + (1-0.4)*15 F2 = 6 + 9 F2 = 15
So, the forecast for period 2 using exponential smoothing with W = 0.4 is 15.
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