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Chapter 4 (Lecture 3, 4)
Chapter 4 (Lecture 3, 4)
• Naïve Approach
• Moving Averages
• Exponential Smoothing
• Trend projection
• Linear Regression
Time Series Models
• Causal Models
• Involves variables that might influence the
quantity being forecast
Decomposition of Time Series
• Trend- Gradual upward or downward movement
of data
• Seasonality-Data that repeats itself after a period
of days
• Cycles- Data pattern that occurs after several years
• Random variations- No observable pattern
Increasing Trend in Data
Seasonal Data
Cyclic Data
Group
• http://groups.yahoo.com/neo/groups/OMS20
13/info
• Term Project
Exponential Smoothing Method
= 0.10
10% 9% 8.1%
= 0.90
90% 9% 0.9%
Table 5.4
Exponential Smoothing with Trend Adjustment
Select to minimize:
Σ | forecast errors |
Mean Absolute Deviation = MAD
n
2
Σ(forecast errors)
Mean Square Error = MSE
n
Ŷ a bX
where
Ŷ computed value
of the variable to
be predicted
(dependent variable)
a Y - axis intercept
XY - nXY
b
X 2 nX 2
Trend Projections
Graph: Actual vs Fitted Line
100
90
Trend Line 89
85
80 78
74
Yield (%)
70 70
66
61
60
54
51
50
45
Actual demand line
40
100 110 120 130 140 150 160 170 180 190
Tem p (Deg C)