Supply Chain Management (Assignment No.

02)

i. Data plot and Trend/Seasonality:

Following charts show the demand variation over time and trends. Refer to chart-2 where
demand is plotted against each month of a year (for several years). It is clear that demand is high
from February to July of every year and lower from August to Jan. The chart-1 however shows an
increasing trend yearly.

Chart - 1 ( Monthly Demand and Trendline)

60000

50000

40000

30000

20000

10000

0
May-13

May-16
May-12

May-14

May-15

May-17

May-18

May-19
Jan-12

Sep-12
Jan-13

Sep-13
Jan-14

Sep-14
Jan-15

Sep-15
Jan-16

Sep-16
Jan-17

Sep-17
Jan-18

Sep-18
Jan-19

Sep-19
Jan-20
Chart-2 (Monthly demand trend)
60000

50000

40000

30000

20000

10000

0
Jan Feb Mar April May June July Aug Sep Oct Nov Dec

Series1 Series2 Series3 Series4 Series5 Series6 Series7 Series8

Submitted by; M. Naveed, MEM223012 Page |1

 Supply Chain Management (Assignment No. 02)

ii. Forecasting Monthly Demands:

Excel Spreadsheet is attached. Demand is forecasted using multiple methods including weighted
moving averages, Exponential smoothing, Exponential smoothing with trend adjustment and
Least Square method.

Least Squared Trend (Calculations)

Data reference: Excel Spreadsheet
x mean = 4950/99 = 50
y mean = 2098770/99 = 21200
∑x2 = 328,350

b = [121516955 – (99) (50) (21200)] / [ 328350 – (99) (50) (50)] = 205

a = 21200 – (205) (50) = 10950
Thus, the least-squares trend equation is;
y = 205x + 10950

iii. Calculations/Analysis/Comments on Performance

a. Mean Absolute Deviation (MAD)

MAD = ∑ |deviations| / n, Data reference: Excel Spreadsheet

Forecast Method MAD

3-months weighted average 9,350
Exponential Smoothing, α = 0.2 12,900
Exponential Smoothing, α = 0.5 9,768
Exponential Smoothing with trend adjustment, α = 0.5 , β = 0.5 7693

Exponential smoothing with trend adjustment is giving the lowest mean absolute deviation at α = 0.5
and β = 0.5.
Thus, it is clear that; as demand follows a seasonal trend so it can be best forecasted with trend
adjustment methods.

Submitted by; M. Naveed, MEM223012 Page |2

 Supply Chain Management (Assignment No. 02)
b. Mean Squared Error (MSE)
MSE = ∑ |deviations|2 / n, Data reference: Excel Spreadsheet

Forecast Method MSE

3-months weighted average 177,428,993
Exponential Smoothing, α = 0.2 230,019,462
Exponential Smoothing, α = 0.5 174,111,654
Exponential Smoothing with trend adjustment, α = 0.5 , β = 0.5 143,551,114

Again, Exponential smoothing with trend adjustment is giving the lowest mean squared error.
MSE does not have a physical meaning however we can compare it with MSE of multiple forecasts.
Lowest is better.

c. Mean absolute percent error (MAPE)

MAPE = ∑ |Actual - Forecast|/Actual / n, Data reference: Excel Spreadsheet

Forecast Method MAPE

3-months weighted average 57%
Exponential Smoothing, α = 0.2 98%
Exponential Smoothing, α = 0.5 64%
Exponential Smoothing with trend adjustment, α = 0.5 , β = 0.5 45%

Lowest MAPE is most accurate.

Submitted by; M. Naveed, MEM223012 Page |3