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    Approaches To Forecasting - Terms and Formulas

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    Eliza Jayne Princess Vizconde
    This document discusses four approaches to forecasting: exponential smoothing, moving average, and time series regression. It provides the formulas and terms used for each approach, including mean absolute deviation (MAD), mean squared error (MSE), mean absolute percentage error (MAPE), slope, and intercept. Exponential smoothing forecasts use a formula that weights the actual previous demand and previous forecast. The moving average approach uses the average actual demand over a set number of previous periods. Time series regression finds the slope and intercept that best fits actual historical data points to forecast future periods.

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    Approaches To Forecasting - Terms and Formulas

    Uploaded by

    Eliza Jayne Princess Vizconde
    13 views2 pages
    This document discusses four approaches to forecasting: exponential smoothing, moving average, and time series regression. It provides the formulas and terms used for each approach, including mean absolute deviation (MAD), mean squared error (MSE), mean absolute percentage error (MAPE), slope, and intercept. Exponential smoothing forecasts use a formula that weights the actual previous demand and previous forecast. The moving average approach uses the average actual demand over a set number of previous periods. Time series regression finds the slope and intercept that best fits actual historical data points to forecast future periods.

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    Approaches to Forecasting – Terms and Formulas

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    This document discusses four approaches to forecasting: exponential smoothing, moving average, and time series regression. It provides the formulas and terms used for each approach, including mean absolute deviation (MAD), mean squared error (MSE), mean absolute percentage error (MAPE), slope, and intercept. Exponential smoothing forecasts use a formula that weights the actual previous demand and previous forecast. The moving average approach uses the average actual demand over a set number of previous periods. Time series regression finds the slope and intercept that best fits actual historical data points to forecast future periods.

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    © All Rights Reserved
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    13 views2 pages

    Approaches To Forecasting - Terms and Formulas

    Uploaded by

    Eliza Jayne Princess Vizconde
    This document discusses four approaches to forecasting: exponential smoothing, moving average, and time series regression. It provides the formulas and terms used for each approach, including mean absolute deviation (MAD), mean squared error (MSE), mean absolute percentage error (MAPE), slope, and intercept. Exponential smoothing forecasts use a formula that weights the actual previous demand and previous forecast. The moving average approach uses the average actual demand over a set number of previous periods. Time series regression finds the slope and intercept that best fits actual historical data points to forecast future periods.

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    of 2

    YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY)

    Approaches to Forecasting – Terms and Formulas


    I. Approaches to Forecasting
    1) Forecasting Exponential Smoothing
    3 Approaches to Forecasting 2) Moving Average
    3) Forecasting Time Series Regression

    II. Forecasting Exponential Smoothing


    MAD - Mean Absolute Deviation
    MSE - Mean Standard Error
    MAPE - Mean Absolute Percentage Error

    Actual
    Period Forecasting Absolute Error Error2 (Absolute Error/AD)*100
    Demand
    Month Given xxx xxx xxx xxx
    Columns and Rows Total
    Needed (6) MAD
    MSE
    MAPE

    Forecast Formula: (𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅 𝒐𝒇 𝒕𝒉𝒆 𝑷𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝑷𝒆𝒓𝒊𝒐𝒅 ∗ 𝑮𝒊𝒗𝒆𝒏 𝑨𝒍𝒑𝒉𝒂) + (𝑭𝒐𝒓𝒆𝒄𝒂𝒔𝒕 𝒐𝒇 𝒕𝒉𝒆 𝑷𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝑷𝒆𝒓𝒊𝒐𝒅 ∗ [𝟏 − 𝑮𝒊𝒗𝒆𝒏 𝑨𝒍𝒑𝒉𝒂])

    Absolute Error
    𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅 − 𝑭𝒐𝒓𝒆𝒄𝒂𝒔𝒕
    Formula:
    Error2 Formula: 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓𝟐
    Last Column 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓
    ∗ 𝟏𝟎𝟎
    Formula: 𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅
    Mean Absolute 𝑻𝒐𝒕𝒂𝒍 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓
    Deviation (MAD)
    𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝒆𝒓𝒓𝒐𝒓𝟐
    Formula:
    Mean Standard Error 𝑻𝒐𝒕𝒂𝒍 𝑬𝒓𝒓𝒐𝒓𝟐
    (MSE) Formula: 𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝑬𝒓𝒓𝒐𝒓𝟐
    Mean Absolute 𝑬𝒓𝒓𝒐𝒓
    𝑻𝒐𝒕𝒂𝒍 (𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 )∗𝟏𝟎𝟎
    Percent Error (MAPE) 𝑨𝑫
    𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝑻𝒐𝒕𝒂𝒍 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆𝒔
    Formula:

    III. Moving Average

    Actual
    Period Forecasting Absolute Error Error2 (Absolute Error/AD)*100
    Demand
    Month Given xxx xxx xxx xxx
    Columns and Rows Total
    Needed (6) MAD
    MSE
    MAPE

    𝑨𝒄𝒕𝒖𝒂𝒍 𝒅𝒆𝒎𝒂𝒏𝒅 𝒐𝒇 𝒕𝒉𝒆 𝒏 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒑𝒆𝒓𝒊𝒐𝒅𝒔


    Forecast Formula:
    𝒏 𝒎𝒐𝒏𝒕𝒉 𝒎𝒐𝒗𝒊𝒏𝒈 𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒅

    Absolute Error
    𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅 − 𝑭𝒐𝒓𝒆𝒄𝒂𝒔𝒕
    Formula:
    Error2 Formula: 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓𝟐

    Last Column 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓


    ∗ 𝟏𝟎𝟎
    Formula: 𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅

    Mean Absolute 𝑻𝒐𝒕𝒂𝒍 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓


    Deviation (MAD)
    𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝒆𝒓𝒓𝒐𝒓𝟐
    Formula:
    Mean Standard
    𝑻𝒐𝒕𝒂𝒍 𝑬𝒓𝒓𝒐𝒓𝟐
    Error (MSE)
    𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝑬𝒓𝒓𝒐𝒓𝟐
    Formula:
    Mean Absolute 𝑨𝒃𝒔𝒐𝒍𝒖𝒕𝒆 𝑬𝒓𝒓𝒐𝒓
    𝑻𝒐𝒕𝒂𝒍 ( )∗𝟏𝟎𝟎
    Percent Error 𝑨𝒄𝒕𝒖𝒂𝒍 𝑫𝒆𝒎𝒂𝒏𝒅
    𝑵𝒐.𝒐𝒇 𝑷𝒆𝒓𝒊𝒐𝒅𝒔 𝒘𝒊𝒕𝒉 𝑻𝒐𝒕𝒂𝒍 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆𝒔
    (MAPE) Formula:

    P a g e 1|2
    Jay]
    YOPMAN - PRODUCTION AND OPERATIONS MANAGEMENT (WITH LABORATORY)
    Approaches to Forecasting – Terms and Formulas
    IV. Forecasting Time Series Regression

    Period x Actual Demand (y) xy x2


    Jan 1 Given
    Columns and Rows … 2
    Needed (6) …
    Total

    [𝒏(𝒕𝒐𝒕𝒂𝒍 𝒙𝒚)−(𝒕𝒐𝒕𝒂𝒍 𝒙)(𝒕𝒐𝒕𝒂𝒍 𝒚)]


    Slope (b) Formula: [𝒏(𝒕𝒐𝒕𝒂𝒍 𝒙𝟐 )−(𝒕𝒐𝒕𝒂𝒍 𝒙)𝟐

    where: n = number of periods

    [𝑻𝒐𝒕𝒂𝒍 𝒚−(𝒃∗𝑻𝒐𝒕𝒂𝒍 𝒙)]


    Intercept (a)
    𝒏
    Formula:
    where: n = number of periods; b= computed slope

    𝒚 = 𝒂 + 𝒃𝒙
    Forecasting Equation
    where: x = number of periods required

    P a g e 2|2
    Jay]

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