Predicted demand of a product for the current month = 4,064 unitsActual demand of the product for the current month = 4,806 unitsSmoothing constant = 0.2Required: Forecast the demand of the product (in units) for the next month?
Question
Predicted demand of a product for the current month = 4,064 unitsActual demand of the product for the current month = 4,806 unitsSmoothing constant = 0.2Required: Forecast the demand of the product (in units) for the next month?
Solution
To forecast the demand of the product for the next month, we can use the Exponential Smoothing method. The formula for this method is:
Ft+1 = Ft + α(At - Ft)
Where: Ft+1 = Forecast for the next period Ft = Forecast for the current period At = Actual demand for the current period α = Smoothing constant
Given in the problem: Ft (Predicted demand for the current month) = 4,064 units At (Actual demand for the current month) = 4,806 units α (Smoothing constant) = 0.2
Substituting these values into the formula:
Ft+1 = 4,064 + 0.2(4,806 - 4,064) Ft+1 = 4,064 + 0.2(742) Ft+1 = 4,064 + 148.4 Ft+1 = 4,212.4 units
So, the forecasted demand of the product for the next month is approximately 4,212 units.
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