Forecasting by Minitab

Example: Sales of everyday commodities

Year Sales values
1985 151
1986 151
1987 147
150
1988 149
1989 146
1990 142

sales
145
1991 143
1992 145
1993 141 140
1994 143
1995 145 1985 1990 1995 2000
1996 138 year
1997 147
1998 151
1999 148
2000 148
Analysis of example data with MINITAB


MTB > Name c3 "FORE1" c4 "UPPE1" c5 "LOWE1"
MTB > SES 'Sales values';
SUBC> Weight 0.1;
SUBC> Initial 8;
SUBC> Forecasts 3;
SUBC> Fstore 'FORE1';
SUBC> Upper 'UPPE1';
SUBC> Lower 'LOWE1';
SUBC> Title "SES alpha=0.1".

Single Exponential Smoothing for Sales values

Data Sales values

Length 16

Smoothing Constant

Alpha 0.1
Accuracy Measures

MAPE 2.2378
MAD 3.2447
MSD 14.4781

Forecasts

Period Forecast Lower Upper

17 146.043 138.094 153.992
18 146.043 138.094 153.992
19 146.043 138.094 153.992
MINITAB uses smoothing from
1st value!
Assume now that the sales are less stable, i.e. during the period the mean
value β0 is possibly changing

Set α to be relatively large. This means that the latest observation

becomes more important in the forecasts.

E.g. Set α=0.5 (A bit exaggerated)

Single Exponential Smoothing for Sales values

Data Sales values

Length 16

Smoothing Constant

Alpha 0.5

Accuracy Measures

MAPE 1.9924
MAD 2.8992
MSD 13.0928

Forecasts

Period Forecast Lower Upper

17 147.873 140.770 154.976
18 147.873 140.770 154.976
19 147.873 140.770 154.976
Slightly wider prediction intervals
We can also use some adaptive procedure to continuosly evaluate the
forecast ability and maybe change the smoothing parameter over time
Alt. We can run the process with different alphas and choose the one that
performs best. This can be done with the MINITAB procedure.
Single Exponential Smoothing for Sales values
---
Smoothing Constant SES optimal alpha
156 Variable
A ctual
Alpha 0.567101 Fits
Forecasts
152 95.0% PI

Smoothing C onstant
Accuracy Measures Alpha 0.567101

Sales values
148 Accuracy Measures
MA PE 1.7914
MA D 2.5940
MSD 12.1632
MAPE 1.7914 144
MAD 2.5940
MSD 12.1632 140

2 4 6 8 10 12 14 16 18
Forecasts Index

Period Forecast Lower Upper

17 148.013 141.658 154.369 Yet, wider prediction intervals
18 148.013 141.658 154.369
19 148.013 141.658 154.369
 Exponential smoothing for times series with trend and/or
seasonal variation

• Double exponential smoothing (one smoothing

parameter) for trend
• Holt’s method (two smoothing parameters) for trend
• Multiplicative Winter’s method (three smoothing
parameters) for seasonal (and trend)
• Additive Winter’s method (three smoothing
parameters) for seasonal (and trend)
 Example: Real Estate Price Index for Weekend
Cottages in Sweden
Year REPI_C
1993 226
Time Series Plot of REPI_C
1994 241
600
1995 239
1996 240 500

1997 268
REPI_C
1998 303 400

1999 336
300
2000 414
2001 472
200
2002 496 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
2003 505
2004 546
2005 591 Trend but no seasonal variation
Applying Holt’s method with MINITAB (denoted Double
exponential smoothing in Minitab)
 2 smoothing
parameters, one for
level and one for trend.
Option to let Minitab
calculate optimal
parameters.

Smoothing parameters should

still be kept low (0.05,0.3)
Double Exponential Smoothing for REPI_C

Data REPI_C
Length 13
Double Exponential Smoothing Plot for REPI_C
Variable
700 Actual
Smoothing Constants Fits
Forecasts
600 95.0% PI

Alpha (level) 0.2 Smoothing Constants

A lpha (lev el) 0.2
500 Gamma (trend) 0.2
Gamma (trend) 0.2 REPI_C
Accuracy Measures
400 MA PE 9.78
MA D 30.15
Accuracy Measures MSD 1160.79
300

MAPE 9.78 200

MAD 30.15
100
MSD 1160.79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Index

Forecasts

Period Forecast Lower Upper

14 611.411 537.537 685.286
15 646.167 570.753 721.581
 Example: Quarterly sales data
year quarter sales
1991 1 124
1991 2 157
1991 3 163
1991 4 126 Time Series Plot of sales
200
1992 1 119
190
1992 2 163
1992 3 176 180

1992 4 127 170

1993 1 126 sales 160

1993 2 160 150

1993 3 181 140

1993 4 121 130

1994 1 131 120

1994 2 168 110
1994 3 189 Quarter Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Year 1991 1992 1993 1994 1995
1994 4 134
1995 1 133
1995 2 167
1995 3 195
1995 4 131
Applying Winter’s multiplicative method with MINITAB
3 smoothing parameters, one for level, one for trend an one for seasonal variation.
No option to calculate optimal parameters. Choices have do be based on visual
inspection of the times series
Winters' Method for sales
Multiplicative Method
Data sales Winters' Method Plot for sales
Multiplicative Method
Length 20
210 Variable
Actual
200 Fits
Smoothing Constants Forecasts
190 95.0% PI
Alpha (level) 0.2
180 Smoothing Constants
Alpha (lev el) 0.2
Gamma (trend) 0.2 170 Gamma (trend) 0.2

sales
Delta (seasonal) 0.2
Delta (seasonal) 0.2 160
Accuracy Measures
150 MA PE 2.6446
MA D 3.8808
Accuracy Measures 140 MSD 23.7076

MAPE 2.6446 130

MAD 3.8808 120
MSD 23.7076 Quarter Q3 Q3 Q3 Q3 Q3 Q3
Year 2008 2009 2010 2011 2012 2013

Forecasts
Period Forecast Lower Upper
Q3-2013 135.625 126.117 145.133
Q4-2013 174.430 164.773 184.087
Q1-2014 194.667 184.844 204.490
Q2-2014 136.933 126.928 146.939