PRESENTED BY:

FABIAN E. GAVIRIA VERGARA

WENDY TOBON MANJARREZ
KAREN AMAYA PUENTES
YIHCE HERRERA
RICHARD D. PINTO LOZANO

OPERATIONS MANAGEMENT
SEMESTER VIII
1. Demand for stereo headphones and CD players for joggers has led Nina Industries to grow almost 50% in the past
year. The number of joggers continues to increase, so Nina expects that demand will also increase, because, so far,
there have been no safety laws that prevent joggers from using headphones. The demand for this inmates from last
year was the following:

DEMAND (UNITS) DEMAND (UNITS)

MONTH MONTH

January 4200 July 5300

February 4300 August 4900
March 4000 September S4Ü0
April 4 400 October 5700
May 5000 November 6300
June 4700 December 6000

a) Using least squares regression analysis, what would you estimate the demand to be for each month of the
coming year? Using a spreadsheet, follow the general format of Illustration 15.11. Compare your results with
those obtained using the spreadsheet's forecast function.
b) To have some assurance of meeting the demand, Nina decides to use three standard errors per se. security. How
many additional units must you retain to reach this level of confidence?

DEMAND(Y)
7000

3000

2000

0
1 2 3 4 5 6 7 8 9 10 11 12

Column K Linear (Column K) Linear (Column K)

100
0
 a) Initially we tabulate and graph the data and establish the linear
regression line through the equation: Y= a + bX

to 3766.67
b 192.31
n 12

YEAR PERIOD(X) DEMAND (Y) X^2 XY Y= 3766.7 + 191.31X

1 4200 1 4200 3958.97
2 4300 4 8600 4151.28
3 4000 9 12000 4343.59
4 4400 16 17600 4535.90
5 5000 25 25000 4728.21
6 4700 36 28200 4920.51
20
19 7 5300 49 37100 5112.82
8 4900 64 39200 5305.13
9 5400 81 48600 5497.44
10 5700 100 57000 5689.74
11 6300 121 69300 5882.05
12 6000 144 72000 6074.36
78 60200 650 418800
b) To have some assurance of meeting the demand, Nina decides to use three standard errors for
safety. How many additional units must you retain to reach this level of confidence?

Regression statistics
Multiple correlation coefficient 0,9375
Determination coefficient RA2 0,8790
RA2 adjusted 0,8569
Typical error 269,8528
Observations 12
Regression statistics
 Multiple correlation coefficient 0,9375
Determination coefficient RA2 0,8790
RA2 adjusted 0,8669
Typical error 269,8528
Observations 12

We can notice that in the Excel add-in the standard error of the estimate is 269.853 and the
Coefficient of Determination is 0.867, since Nina Industries chose to use three standard errors we
have:
3(269,852)(0,867)=701,88

Nina must have 701 additional units than forecast to reach the expected level of confidence
YEAR PERIOD(X) DEMAND (Y) Y= 3766.7 + 191.31X
13 4200 6266.67
14 4300 6458.97
15 4000 6651.28
16 4400 6843.59
17 5000 7035.90
18 4700 7228.21
20
20 19 5300 7420.51
20 4900 7612.82
21 5400 7805.13
22 5700 7997.44
23 6300 8189.74
24 6000 8382.05
 2. The historical demand for the product is
MONTHS DEMAND PMP n=7 PMS n=3
January 12 DEMAND
February January 11 12
MarchFebruary 15 11

AprilMarch 12 15 12.67
April 12
May 16 16
12.67
May June
June 15 15 14.33
) and 0.10, calculate the July static forecast .
July 13.5 14.33
a) Using a weighted moving average with weights of 0-60, 0.30 , and 0.10, calculate the July
ostic for June 13, calculate the
forecast. W1 0.6
b) Using the three- month simple moving average, determine the forecast for July.
ratio of the preceding data for W2 0.3
c) Using simple exponential smoothing with a = 0.2 and a forecast for June 13, calculate the
forecast for July. Make all theW3assumptions0.1you want.
July.
d) Using a simple linear regression analysis , calculate the relationship inequality from the data
preceding the demand. α 0.2
e) ft-1 13
Using the regression equation in point d), calculate the forecast for July.
At-1 13

ANSWERS: DEMAND(Y)
nities. A) Forecast for the month of July using weighted moving average is 13.5 u
ades. B) Forecast for the month of July using simple moving average is 14.33 units
,4 units. C) Forecast for the month of July using Simple Exponential Smoothing is 13
D) Linear regression equation: Y=10.8 + 0.7714X
E) Forecast for the month of July using the equation Y=10.8 + 0.7714X as units.
result 16.2
8

0
12345

Column T Linear (Column T) Linear (Column T)

 SES PERIOD(X) MONTHS DEMAND(Y) X^2 XY Y=10.8 + 0.7714X
1 January 12 1 12 11.57
2 February 11 4 22 12.34
3 March 15 9 45 13.11
4 April 12 16 48 13.89
5 May 16 25 80 14.66
13 6 June 15 36 90 15.43
13.4
21 81 91 297

to 10.8
b 0.7714
n 6

PERIOD(X) MONTH Y=a+bx

7 July 16.2
The following tabulations are actual unit sales for six months and an initial forecast for January.
initial attic fora) Compute the forecasts for the remaining five months with simple exponential smoothing with a=0.2.
b) Calculate the MAD of the forecasts.
simple ictal with
MONTH REAL FORECAST MISTAKE ABS MAD
REAL FORECAST
January 100 80 20 20 20
February 94January 84 100 10 SW 10 15
February 94
March 106 86 106 20 20 16.7
April 80 90 80 -10 10 15
March April May
May 68 88 68 -20 20 16
June
June 94 84 94 10 10 15

α 0.2
ANSWERS:
A) Forecast for the remaining 5 months using simple exponential smoothing with u α= 0.2
was: 84; 86; 90; 88; 84 respectively.
B) The MAD for each forecast was: 20; fifteen; 16.7; fifteen; 16; 15 respectively

6
Pen-type lores4. Zeus Computer Chips. Inc. h had major contracts to produce Pen-type microprocessors thium. The
does not market hasYEAR
been down inQUARTER
the last 3 years due REAL
to dual-core
SALES chips, which Zeus does
AVERAGE not produce,
ACTUAL so it has
SALES/STAC
produce, the the painful task of forecastingYonext year. The task4800
is difficult because the company 3833
has not been able to
company does find replacement chips for its product lines. Here is the demand for the last 12 quarters:
II 3500 2767
not 2005
III 4300 3500
L of the last 2005 2006 2007
IV 3000 2367
1 4800 1 3500 1 3200
II Yo
3500 II 3500
2700 II 2100 3833
II
4300 III 2700 III 2767
2006 III 3500 2700
IV III
3000 IV 3500
2400 IV 1700
3500
IV 2400 2367
Use the decomposition technique to forecast the four quarters of 2008
Yo 3200 3833
II 2100 2767
2007
III 2700 3500
IV 1700 2367
37400

AND
4500

2000

1500

1000

500

0
12345678
 and
AVERAGE / STAT Yes DESEASONALIZE x xy
3117 1.23 3903 1 3903 3902.61
3117 0.89 3943 2 3943 7885.54
3117 1.12 3829 3 3829 11487.14
3117 0.76 3951 4 3951 15802.82
3117 1.23 2846 5 2846 14228.26
3117 0.89 3042 6 3042 18249.40
3117 1.12 3117 7 3117 21816.67
3117 0.76 3161 8 3161 25284.51
3117 1.23 2602 9 2602 23415.65
3117 0.89 2366 10 2366 23656.63
3117 1.12 2404 11 2404 26447.14
3117 0.76 2239 12 2239 26864.79
37400 78 37400 219041.15

to 4210.3
b -168.24
n 12
YEAR0 STATIONS x Y=4210.3+(-168.24X)
Yo 13 2023.08
II 14 1854.84
2008
III 15 1686.60
IV 16 1518.35

9 10 11 12
 x² Y=4210.3+(-168.24X) FORECAST (SEASONALIZE)
1 4042.007 4971.452
4 3873.763 3438.742
9 3705.520 4161.279
16 3537.276 2686.060
25 3369.032 4143.729
36 3200.789 2841.342
49 3032.545 3405.532
64 2864.301 2175.031
81 2696.057 3316.006
100 2527.814 2243.942
121 2359.570 2649.785
144 2191.326 1664.002
650 37400 37696.90

PR0N0STIC0
2488.28
1646.54
1894.04
1152.97
It's sales 5. Sales data for 2 years is as follows. The data is accumulated with two months of sales in each “period”

Year
MONTHS
months
SALES sales(Y)
MONTHS
period(X)
SALES
Y=122.03+1.136X
January February 109 1 123.166
January February 109 January February 115
March April March April104 104
March April 2 112 124.302
May June May June 150 May June150 3 159 125.438
2018
July August July August170 170
July August 4 182 126.574
September OctoberSeptember-October
120
120
September October 5 126 127.71
November December 100 November December 106
November December 100 6 128.846
January February 115 7 129.982
a) Draw the graph.
b) Compose a simple March April
linear regression model for the sales112
data . 8 131.118
c) In addition2019 May Junemodel , determine the multiplying
to the regression 159 9 seasonal index.
factors for the 132.254
A
tac juna]. HE July August
complete cycle is assumed to be 1 year. 182 10 133.39
d) With the results of September-October
parts b) and c), prepare a forecast for126the coming year. 11 134.526
November December 106 12 135.662
1553 78
to 122.03
a) Initially we tabulate and graph the data
b 1.136

b) taking into account the simple linear equation is Y=122.03+1.136X,

the simple regression model would be as follows :
average sales/status average/stat
112 129.4 0.87
0.83
108 129.4
1.19
154.5 129.4
1.36
176 129.4 0.95
123 129.4 0.80
103 129.4 0.87
112 129.4 0.83
108 129.4 1.19
154.5 129.4 1.36
176 129.4 0.95
0.80
123 129.4
103 129.4
1553

d) Forecast for next year

YEAR0 MONTHS x Y=122.03+1.136X
January February 13 136.80
March April 14 137.93
May June 15 139.07
2020
July August 16 140.21
September-October 17 141.34
November December 18 142.48
PR0N0STIC0
118.39
115.11
166.02
190.67
134.33
113.40
6. The tracking signals calculated with the past demand history of three products is as follows. Each
product uses the same forecasting technique.

TS 1 TS 2 TS 3
1
-2.70 154 0.10

2 -2.32 -0.64 0.43

3 -1.70 2.05 1.08
4 -1.1 2.58 1.74
5 -0.87 -0.95 1.94
6 -0.05 -1.23 2.24

7 0.10 0.75 2.96

8 0.40
-1.59 302
9 1.50 0.47 3.54

10 2.20 2.74 3.75

Discuss the tracking signals for each product and point out their implications.

TS1: Given that there has been a rapid increase in trend, the forecast will soon be outside
the limits. Therefore, the forecast model is poor.
it is products it is

period TS1 TS2 TS3

1 -2.7 1.54 0.1
2 -2.32 -0.64 0.43
3 -1.7 2.05 1.08
4 -1.1 2.58 1.74
5 -0.87 -0.95 1.94
6 -0.05 -1.23 2.24
7 0.1 0.75 2.96
8 0.4 -1.59 3.02
9 1.5 0.47 3.54
10 2.2 2.74 3.75

3.5
£3
exercise 7...............................................................24
exercise 11 39
exercise 12 42
EXERCISE 14 46
EXERCISE 15 49
exercise 21 63
EXERCISE 23 70

0
1

TS2 is within the limits, therefore, the forecast is

acceptable.
TS3, out
 TS3

This series is increasing rapidly and is out of limits,

consequently the model is poor.
 exercise
7 The following table shows the previous 2 years of reports.
seasonal and that the seasonal cycle is 1 year. Use d series

QUARTER SALES (AT) AVG AT/EST AVG/ESTINDEX (S) END

STATION
YEARS (AT/S)
1 160 188 186.88 1.00 159.5
2 195 218 186.88 1.16 167.5
YEAR 1
3 150 178 186.88 0.95 157.9
4 140 165 186.88 0.88 158.6
5 215 188 186.88 1.00 214.3
6 240 218 186.88 1.16 206.2
YEAR 2
7 205 178 186.88 0.95 215.8
8 190 165 186.88 0.88 215.2
SUMMATIO 1495
N
AVG/EST 186.88

yx2—.
x 4.5
AND 186.88
AND 20.25

a^Y -bX 142.28

y = a + bx = 142,28 +

In this case, as the exercise asks to find

the forecast of quarterly sales for the PERIOD QUARTER
next year, the result is in column #5 of
the following table:
9 Yo
10 II
11 III
12 SAW

GRAPH

QUARTERLY SALES FORECAST

TWO PREVIOUS YEARS
3 DO
 QUARTERLY SALES FORECAST
TWO PREVIOUS YEARS
300

250

E 200
•[
11
2 150
z
5 100
V = 7.2024x +154.46

50 Trace area

0
12345678
QUARTERS
ation of quarterly sales. Assume there are trends and time decay factors to forecast quarterly sales for the
year.
following.

x AND XY X^2 AND

1 159.5 159.5 1 152.2

2 167.5 335.1 4 162.1
3 157.9 473.8 9 172.0
4 158.6 634.2 16 181.9
5 214.3 1071.4 25 191.8
6 206.2 1237.2 36 201.7
7 215.8 1510.8 49 211.6
8 215.2 1721.5 64 221.5
36 1495.0 7143.5 204

nXY 9.91

:(x)2

9; 9IX

AND OF THE STRAIGHT OF FORECAST AND*

SEASONAL FACTOR SEASONAL FACTOR FOR
REGRESSION NEXT YEAR

231.43 1.00 232.20

241.33 1.16 280.88
251.24 0.95 238.64
261.15 0.88 230.58

Summary
 Regression Statistics
Multiple correlation coefficient 0.51244051648388
Determination coefficient R 0.26259528293427
Adjusted R^2 0.13969449675664
Typical error 31.9326237618749
Observations 8

VARIANCE ANALYSIS
Degrees of freedom Sum of squares io of which F
Regression 1 2178.72023809524 2178.72024 2.13664445
Waste 6 6118.15476190476 1019.69246
Total 7 8296.875

Coefficients Typical error t-statistic Probability

Interception 154.464285714286 24.8816999773764 6.20794744 0.00080604
Variable x 1 7.20238095238095 4.9273108195364 1.46172653 0.19412861

Analysis of residuals
Observation Forecast for Y Waste
1 161.666666666667 -1.66666666666669
2 168.869047619048 26.1309523809524
3 176.071428571429 -26.0714285714286
4 183.27380952381 -43.2738095238095
5 190.476190476191 24.5238095238095
6 197.678571428571 42.3214285714286
7 204.880952380952 0.11904761904762
8 212.083333333333 -22.0833333333333
INDEX (S) SEASONALIZE (Y*S) FORECASTS

1.00 152.7 152.7

1.16 188.7 188.7
0.95 163.4 163.4
0.88 160.6 160.6
1.00 192.4 192.4
1.16 234.8 234.8
0.95 201.0 201.0
0.88 195.6 195.6
critical
to value of F 0.19412861 2006 2007
)
Quarter Quantity units) Quarter Quantity units)
Yo 12 Yo 16
II 18 II 24
Lower 95% TopIII95% Lower
26 95.0% upper 95.0%
III 28
93.5809592 215.347612265562
IV 93.58095916301
16 215.347612
IV 18
-4.85431429 19.2590761909794 -4.854314286218 19.2590762

Jan-Feb 08 12
Mar-Apr 08 18
May-Jun 08 26
Jul-Aug 08 16
Sep-Oct 08 16
Nov-Dec 08 24
Jan-Feb 09 28
Mar-Apr 09 18

b) The equation is y=1.0238x+15.143

year perioro quarter sales
1 Yo 12
2 II 18
2006
3 III 26
4 IV 16
5 Yo 16
6 II 24
2007
7 III 28
8 IV 18
Deseasonalize

year perioro quarter sales

1 Yo 12
2 II 18
2006
3 III 26
4 IV 16
5 Yo 16
AAA- 6 II 24
 7 III 28
8 IV 18

25

20

15

10

0
0

c) 2008 sales
year perioro quarter
9 Yo
10 II
2008
11 III
12 IV
 deseasonalization
year perioro quarter
9 Yo
10 II
2008
11 III
12 IV
 Simple regression model
y=1.0238x+15.143 actual/trend ratio season factor
16.2 0.745
Yo
17.2 1.053
18.2 1.436
II
19.3 0.838
20.3 0.796
III
21.3 1.137
22.3 1.267
IV
23.4 0.779

tion with Trend Adjusted by Linear Regression.

average for each quarter seasonal factor seasonally adjusted sales
1 0.709 16.93
4
2 1.063 16.93
1
2 1.367 19.02
7
1 0.861 18.59
7 0.709 22.57
1.063 22.57
 1.367 20.48
0.861 20.981

Chart Title

y=1.0238x+15.143 Seasonal factor forecast

24.4 0.771 19
25.4 1.095 27
26.4 1.35 35
27.4 0.808 22

ion with trend adjusted by linear refraction

0,7231+16,505 Seasonal factor forecast
23.0 0.709 16
23.7 1.063 35
24.5 1.37 33
25.2 0.861 22
2006 and
2007

0,7231+16,505
17.2
18.0
18.7
19.4
20.1
20.8
21.6
22.3
 Week 1 300
week 2 400
week 3 600
week 4 700

to ft 567
) forecast week 567

b) Using the exponential smoothing equation we have:

Week 3, 600 articles were demanded, what would be left

ft 400
Week 5 forecast is 400
 1. What has been sold in the last three months will probably be what has
been sold in the next three months.
2. What was sold in the same quarter last year will probably be sold during
this year (this would account for seasonal effects).
3. It is likely to sell 10 percent more in the next three months than in previous
months.
4. It is likely to sell 50 percent more in the next three months than in the
same three months of the previous year.
5. Whatever the percentage change was in the last three months compared
to the same three months last year, it will probably be the percentage change
that will occur in the next three months of the year.

Quarters
Yo II III IV
Last year 360 560 420 675
This year 395 580

Strategy 1 forecast for the second quarter would be 395 and which was 580

68%

Strategy 2 forecast for the second quarter would be 560 and which was 580

97%

forecast for the second quarter would be 1.10*(395)=424.5, the

Strategy 3 cu

75
%
is sold in

mind on that
in the three
in the
this year in
himself

at was 580
exercise 11

The current tabulated demand for an item during a period is given below.
nine months (January to September). Your supervisor wants to try two methods
test to see which one was better in the period. a) Forecast April to
September with a three-month moving average. b) Through smoothing
simple exponential with an alpha of 0.3, calculate from April to September c) Use the MAD
to decide which method produced the best forecast over the six-month period.

A) Forecast April to September with a three-way moving average

months.

Simple
moving Des. 3 Real
Month Sales average months Demand
n=3
January 110
February 130
March 150
April 170 130 40 170
May 160 150 10 160
June 180 160 20 180
July 140 170 30 140
August 130 160 30 130
September 140 150 10 140
 Month Real
January 110
February 130
March 150
April 170
May 160
June 180
July 140
August 130
September 140

B) Using simple exponential smoothing with an alpha

of 0.3, calculate from April to September.

Month Sale Simple

moving Demand Forecast Forecast
average n=3 Real (At-1) Initial (Ft-1) α (Alpha) Forecast Error (At-Ft)
January 110 0.3
February 130 0.3
March 150 0.3
April 170 130 170 130 0.3 142 40
May 160 150 160 142 0.3 147 10
June 180 160 180 147 0.3 157 20
July 140 170 140 157 0.3 152 -30
August 130 160 130 152 0.3 145 -30
September 140 150 140 145 0.3 144 -10

C)• The method to see which was better in the period is through “Smoothing Exposed
 Absolut
mistake MAD

40 40
10 25
20 23
30 25
30 26
10 23
cial“
exercise
12 A certain forecasting model was applied to anticipate an actual six-month
period that emerged.

PERIOD MONTH FORECAST REALITY DEVIATION RSFE SV. ABSOLU

1 April 250 200 -50 -50 50

2 May 325 250 -75 -125 75
3 June 400 325 -75 -200 75
4 July 350 -350 -550 350
5 August 375 325 -50 -600 50
6 September 450 400 -50 -650 50
FOR MONTH 6 (SEPTEMBER) THERE IS A TS (TRACKING SIGNAL) OF -6
FOR THE 6TH MONTH (SEPTEMBER) THERE IS 108.3
A
MAD OF 108.3

AVERAGE

CONCLUSION: With respect to the above, it can be said that the

The average forecast is 108.3 units away and the signal of
tracking is equal to -6 mean absolute deviations. so not
There is enough evidence to reject the forecast model, so
Their recommendations are accepted.

On the other hand, it is important to mention that the

tracking signal
change from -1 to -6 MAD, this happened because the forecast was higher than
the real demand in all previous periods, if the real demand
did not fall below the forecast, the tracking signal would continue
increasing so that one would then end up saying that it is an evil
forecast.
. Here are the forecasted demand and the

SUM DEV. MAD TS= RSFE/MAD

ABSOLUTE
50 50 -1
125 62.5 -2
200 66.7 -3
550 137.5 -4
600 120 -5
650 108.3 -6

NTO BY MONTHS

SES
 Harlen Industries has a simple forecasting model: it takes
year 13 the actual demand for the same month of the previous year and divides it by the Week
fractional number of weeks in that month. This gives a
average weekly demand for the month. This week's average is used as a weekly forecast 1
for the same month this year. The technique was used to forecast eight weeks this year, 2
shown below along with actual demand. The next eight weeks show the forecast (based on 3
last year) and actual demand:
4
5
6
7
8

Forecast Real Forecast

Week Demand ABS MAD MR
Demand (Ft) (At) Error (At-Ft)

1 140 137 -3 3 3.0 -1

2 140 133 -7 7 5.0 -2
3 140 150 10 10 6.7 0
4 140 160 20 20 10.0 2
5 140 180 40 40 16.0 4
6 150 170 20 20 16.7 5
7 150 185 35 35 19.3 6
8 150 205 55 55 23.8 7
100.4 20.6709
Forecast Demand Real Demand
140 137
140 133
140 150
140 160
140 180
150 170
150 185
150 205

c) The tracking signal is too large, so the forecast is

unacceptable.
 EXERCISE 14

The following table contains the demand for the last 10 months. a) Calculate the trended exponential smoothing
forecast for this data, with an α of 0.30, δ of 0.30, a forecast (MAD) of each forecast. Which is the best?

α=0,30
MONTH REAL DEMAND SES FORECAST ERROR ABS MAD
1 31
2 34 31 3.0 3.0 3.0
3 33 31.9 1.1 1.1 2.1
4 35 32.2 2.8 2.8 2.3
5 37 33.1 3.9 3.9 2.7
6 36 34.2 1.8 1.8 2.5
7 38 34.8 3.2 3.2 2.6
8 40 35.7 4.3 4.3 2.9
9 40 37.0 3.0 3.0 2.9

10 41 37.9 3.1 3.1 2.9

ALPHA 0.3
BETA 0.3 R/ the method is chosen
TREND 1
Q. 30
exponentiati
simple exponential ion of these data with an α of 0.30 and an initial forecast (F1) of 31. b) Calculate the forecast
initial trend trend (T1) of 1 and an initial exponential uniform forecast of 30. c) Calculate the absolute deviation

BETA=0.30
MR TREND FORECAST FORECAST ERROR ABS MAD MR

1.0 1.3 32.7 32.7 32.7 1

2.0 10.5 22.5 22.5 27.61 2
3.0 17.0 18.0 18.0 24.4 3
4.0 21.8 15.2 15.2 22.1 4
5.0 25.5 10.5 10.5 19.8 5
6.0 28.3 9.7 9.7 18.1 6
7.0 30.5 9.5 9.5 16.9 7
8.0 32.5 7.5 7.5 15.7 8

9.0 34.1 6.9 6.9 14.7 9

of exponential smoothing since the margin of error is more acceptable

 fifteen
or
of . In this
aofmodel thatproblem
has you will test the validity of your forecasting model. The forecasts used and the actual
demand
ta average produced are given below.
Use the
attic youstatistical
have usedmodel to calculate the MAD and the tracking signal then decide if the forecast model
provides reasonable results.

Week FORECAST REAL RSFE ABS

MAD MR FORECAST ERROR SUMA ABS
100
E 1 800 900 100 100 100 100
125
X 2 850 FT-1
1000 900
250 150 150 250
116.7
E 3 950 1050
AT-1 1000
350 100 100 350
R
100 43 950 900
α 0.28571429
300 -50 50 400
CI
100 52 1000 900 200 -100 100 500
104.2 6
3.12 975 1100 325 125 125 625
16 Suppose that your stock of merchandise for sale is maintained on the basis of the prospective sales
demand of the distributor who calls on the first day of each month, calculate your sales forecast with the
three methods.
A with a 4-month simple moving average calculates a forecast for October
B with a weighted moving average, what is the forecast for September with relative values of 0.20, 0
C using simple exponential smoothing and assuming that the June forecast was 130 forecastq
EXERCISE 16

Real to) SEPTEMBER 163.333333

June 140 B) PMP June 140
July 180 July 180
August 170 August 170
September 167
osticated If the staff of two requested .30, 0.50 for June July and
August respectively?
ue September sales with a smoothing constant 0.30

Importance
Smoothing α 0.3
0.2 June 130
0.3 （Pro…）
0.5 June 140
July 133
August 93
September 65
17 the historical demand for a product is as follows
Using a four-month simple moving average, calculate the forecast for obturation.
B, using simple exponential smoothing with alpha 0.2 and a forecast for September = 65, calculate a
demand
D calculate a forecast for October

MONTHS DEMAND average mo x AND X^2

April 6 _1 1 60 1
May 0 5 <
2 2 55 4
EXERCISE 17

June 5 7 Z 3 75 9
July 5 6 EITHER 4 60 16
August 0 8 62.5 EITHER
c (LU
c 5 80 25
September 0 7 67.5 6 75 36
October 5 72.5 21 405 91
FT-1 65
AT-1 65 FACT
α 0.2 100
forecast for october

Y^2 XY n x y= 54+3.86x

OCTOBER FORECAST
3600 60 1 7 81
3025 110
5625 225
3600 240
6400 400
5625 450
27875 1485

HISTORICAL S to 54
b 3.86
n 6
y= 54+3.86x
to 54
b 3.86
6
n
y= 54+3.86x
exercise 18 Sales by quarter of the last year and the first three
This year's quarters are as follows:
With the focused forecasting procedure described in
text, forecast expected sales for the fourth quarter
of this year.

Year QUARTERS DEMAND strategy A Last three

Yo 23000 Current three
II 27000
III 18000
Last year IV 9000 strategy B III quarter to
Yo 19000 III quarter to
II 24000
III 15000
This year IV 7500 strategy C III quarter to
III quarter to
IV quarter to
The best strategy is c. and the
We apply for the IV term of this
year.
months
=24000
months=1500 1.60
0

last year= 18000

current year= 1.20
15000

current size= 7500

15000
last year= 18000
current size= 9000
19 The following table shows the predicted demand for a product with a certain forecasting method. A
calculates the tracking signal with the mean absolute deviation and the continuous sum of forecast errors.
B Comment if your forecasting method gives good predictions.

FORECAST REAL PRONE R ABS MAD MR

1500 1550 50 50 50 1
EXERCISE 19

1400 1500 100 100 75 2

1700 1600 -100 100 83 3
1750 1650 -100 100 88 4
1800 1700 -100 100 90 5
-150 150
along with real demand

FT-1 1550 The forecast gives good predictions because it has to be between
1 and 4 and shows that it is within the proposed
AT-1 1500
α 0.33333333
MOVING AVERAGE MONTH
ABS EMANDA
SESR EDIO MOBILE ABS
EA
At (Real
Month (t) Demand)
1 62
2 6561 1 62
3 67 62.2 2 65
42.60 68 63.6 64.667 3.333
EXERCISE 20

65.4 4.36 3 67
67.1 53.90 4 71 64.9 66.667
6.05 4.333 i LU Z or <CLNX4LU zoo 68
69.3 63.70 5 73 66.7 68.667
6.24 4.333 <5•
5 71
71.4 74.60 6 76 68.6 70.667
7.37 5.333 6 73
74.1 83.90 3 78 70.8 73.333
7.16 4.667 7 76
76.4 91.60 4 78 72.9 75.667
5.01 2.333 8 78
77.6 102.40 9 80 74.4 77.333
5.51 2.667 9 78
79 115.00 9 84 76.1 78.667
7.85 5.333 10 80
81.6 123.40 5 85 78.5 80.667
6.5 4.333 11 MAD84
31.10 N 0 56.05 9 36.667 12 85
61 T.T. 1.8 W1 0.50 F1
61 FT-1 60 W2 Proning 0.30 A1
is recommended
for
αperiods
0.3 Ṡ 0.3 W3 0.20
α 0.3
 Ft (Units) Tt (Trend) FITt

60 1.8 61.8
61.86 1.82 63.68
64.07 1.94 66.01
66.31 2.03 68.33 0.33 0.33
68.23 2.00 70.23 -0.77 0.77
70.46 2.07 72.53 -0.47 0.47
72.67 2.11 74.78 -1.22 1.22
75.14 2.22 77.36 -0.64 0.64
77.55 2.28 79.83 1.83 1.83
79.28 2.11 81.39 1.39 1.39
80.97 1.09 82.96 -1.04 1.04
83.27 2.08 85.35 0.35 0.35
MAD 0.89
exponential smoothing technique with two trend components
because they give us the smallest MAD.
exercise 21
Do a regression analysis on demand without seasonal factors for p
2003, given the following historical data of the d

STRAIGHT
PERIOD QUARTER OF THE
The calculation will then proceed 9 SPRING 7 R 1 E 2 G . R 8 E 8
of the demand corresponding to the 10 SUMMER S768.662398
2I8O7N1
summer of 2003
11 AUTUMN 824.441925
12 WINTER 880.221452

YEAR PERIOD QUARTER AVG AT/ AVG/EST INDEX

REAL ITS T
DEMAND
1 Spring 205 340 461.9 0.74
2 Summer 140 207.5 461.9 0.45
2001
3 Autumn 375 530 461.9 1.15
4 Winter 575 770 461.9 1.67
5 Spring 475 340 461.9 0.74
6 Summer 275 207.5 461.9 0.45
2002
7 Autumn 685 530 461.9 1.15
8 Winter 965 770 461.9 1.67
TOTAL 36 3695 3695
AVERAGE 4.5
EST AVG 461.9
IXY_nXY
b— 2 55.8
2X2-n(X)

x 4.5
AND 461.9
v- 20.25
Is

-9
to

210.9
c
II

y = a + bx = 210.9 + 55.8X
Summary

Regression Statistics
Coefficient d 0.81176017
 d coefficient 0.65895457
Adjusted
R^2
0.60211366
Typical error
1.54509482
Observation
8

VARIANCE ANALYSIS
Square degrees of freedom F critical value of
gressio 1 27.6760919 27.6760919 11.5929641 0.01440975
ste 6 14.3239081 2.38731801
al 7 42

Coefficients
Standard
error t-
statistic
Probability
Lower 95%
Upper 95%
Intercept
1.15588098
1.12386074
1.02849129
0.34338308 -
1.59410718
3.90586914
 Variable
40484421
0.01440975
0.00203702
0.01244361

Analysis of
residuals

Onostic
Observation
for Residues
1

2
.
6
4
0
1
4
4
9

-
1
.
6
4
0
1
4
4
9
2

2
.
1
6
9
5
2
4
6
3

-
0
.
1
6
9
5
2
4
6
3
3

3
.
8
7
0
9
9
7
9
1

-
0
.
8
7
0
9
9
7
9
1
4

5
.
3
1
9
0
6
0
2
7

-
1
.
3
1
9
0
6
0
2
7
5

4
.
5
9
5
0
2
9
0
9

0
.
4
0
4
9
7
0
9
1
6

3
.
1
4
6
9
6
6
7
3

2
.
8
5
3
0
3
3
2
7
7

6
.
1
1
5
4
9
4
5
8

0
.
8
8
4
5
0
5
4
2
8

8
.
1
4
2
7
8
1
8
9

-
0
.
1
4
2
7
8
1
8
9
forecast demand in the summer of demand.

END y=a+bx=210 LIZAR

STATION x AND XY X^2 .9+55.8X INDEX (S) STATION
(AT/S) (Y*S)
278.48 1 278.48 278.5 1 266.6 0.74 196.3
311.63 2 311.63 623.3 4 322.4 0.45 144.9
326.80 3 326.80 980.4 9 378.2 1.15 434.0
344.91 4 344.91 1379.6 16 434.0 1.67 723.5
645.27 5 645.27 3226.3 25 489.8 0.74 360.5
612.12 6 612.12 3672.7 36 545.5 0.45 245.1
596.95 7 596.95 4178.7 49 601.3 1.15 690.0
578.84 8 578.84 4630.7 64 657.1 1.67 1095.5
36 3695.00 18970.2 204
4.5

TOR FOR THE

NEXT
ESTACIO QUARTER
0.7 524.77
4 0.4 345.33
5 1.1 946.04
5 1.6 1467.43
7
lower 95.0%upper 95.0% -1.59410718 3.90586914
0.00203702 0.01244361
22) The following are the results of the last 21 months of actual sales d

A Actual
T A Actual
T

X Period X Month demand demand

2006 2007
1 January 300 275
2 February 400 375
3 March 425 350
4 April 450 425
5 May 400 400
6 June 460 350
7 July 400 350
8 August 300 275
9 September 375 350
10 October 500
11 November 550
12 December 500

Develop a forecast for the fourth quarter using three pr rules to

correctly apply the procedure, the rules are tested best performing pri
is used to forecast the fourth quarter). Instead of forecasting separate
months.
Rule 1 Forecast error = 31%
Forecast (Oct, Nov, Dec) = Demand (July + August + September)
Forecast (Oct, Nov, Dec) = 1075
Actual demand (Apr, May, Jun) = 1550
Rule 2 Forecast error = 10%
Forecast (July, Aug, Sept 2007) = Demand (July + Aug + Sept 2006)
Forecast (July, Aug, Sept 2007) = 1075
Actual demand (July, Aug, Sept 2007) = 975
Rule 5
Forecast (July, Aug, Sept 2007) = 964
Actual demand (July, Aug, Sept 2007) = 975
Forecast error = 1%

Rule No. is chosen. 5 to forecast the fourth quarter, because it is the error in
the forecast test

Forecast (Oct, Nov, Dec 2007) 1406

e certain product.

focused oncast (note that

grouper in the third trimester;
the
the problem with quarters, in

that presents minor

 EXERCISE 23

The actual demand for a product in the previous three months was

MONTHS UNITS pms n=3 SES MONTHS UNITS

Three months ago 400 Three months ago 450
Two months ago 350 Two months ago 400
Last month 325 Last month 325
Current month 300 358.333333 Current month
Next month 270.833333

a) Using a three-month simple moving average, make a forecast for this month. R/ The
forecast demand for the current month is 358.33

b) If this month the actual demand was 300 units, what would be your forecast for next
month? R/ It is forecast that the next month will be 270.83

c) With simple exponential smoothing, what would be your forecast for this month if the
uniform exponential forecast three months ago was 450 units and the uniformity constant
was 0.20? R/ The forecast with a real demand of 450 three months ago and a uniform
constant of 0.20, the estimated forecast would be 417 units
ALPHA= 0.20 SES

450
440

417

ALPHA 0.2
real sales 450
forecasted demand 450
N 4

ANSWER 3
ALPHA 1.5
real sales 300
forecasted demand 358.333333
N 4

ANSWER 2
Forecasting by DMA and a tracking signal

Period Month Forecast Reality Deviation SCEP

May 1 450 500 50 50
Jun 2 500 550 50 100
Jul 3 550 400 -150 -50
Aug 4 600 500 -100 -150
Sep 5 650 675 25 -125
Oct 6 700 600 -100 -225

S.T.
Abs deviation Sum Dev. Abs. 25)DMA
The earningsS.T.
per share from two comps in 2004 to the second
in 2007 are noted below. Forecast po profits for 2008. Use
50 50 50 exponential smoothing
1 to forecast the ter time series
50 100 decomposition
50 to forecast
2 the last quarters of 2008 (it is much
150 250 83.33 easier to solve the
-0.6 problem in to see what happens).
100 350 87.5 -1.71
25 375 75 -1.67
100 475 79.17 -2.84

EARNINGS PER SHARE a) For the

Year Period Quarter Company A Company B initial
1 Yo 1.67 0.17 method.
2 II 2.35 0.24 Make
2004
3 III 1.11 0.26
4 IV 1.15 0.34
5 Yo 1.56 0.25 α = 0.10
6 II 2.04 0.37 α = 0.30
2005
7 III 1.14 0.36
8 IV 0.38 0.44
9 Yo 0.29 0.33
10 II -0.18 0.40
2006
11 III -0.97 0.41
12 IV 0.20 0.47
13 Yo -1.54 0.30 b) With the
14 II 0.38 0.47 2004 met
2007
15 III 1.54 0.20
16 IV
17 Yo
18 II
2008
19 III
20 IV
years, by quarter, of the first quarter r action for the rest of 2007 and
cer period of 2007 and the method of
The two quarters of 2007 and all four a computerized spreadsheet,

all exponential smoothing, take the first quarter of 2004 as the forecast two forecasts: one with
α = 0.10 and another with α = 0.30.

Company A Company B
F15 = 1.54 α = 0.10 F15 = 0.20
F15= 1.28 α = 0.30 F15 = 0.26
odo MAD to test the performance of the forecast model, plus actual data from the second
quarter of 2007, how well did the model perform?
 EXERCISE 26
Below are the sales revenue for a utility company gr 2011. Use your best judgment, intuition, or
common sense as to which model or method to use, as

x MONTH INCOME (MILLIONS) XA2

XY y = 5050.4+ 55.62x
1 1997 4865.9 4865.9 1 5106.06363636364
2 1998 5067.4 10134.8 4 5161.68363636364
3 1999 5515.6 16546.8 9 5217.30363636364
4 2000 5728.8 22915.2 16 5272.92363636364
5 2001 5497.7 27488.5 25 5328.54363636364
6 2002 5197.7 31186.2 36 5384.16363636364
7 2003 5094.4 35660.8 49 5439.78363636364
8 2004 5108.8 40870.4 64 5495.40363636364
9 2005 5550.6 49955.4 81 5551.02363636364
10 2006 5738.9 57389 100 5606.64363636364
11 2007 5860 64460 121 5662.26363636363
66 59225.8 361473 506

to 5050.44363636364
b 55.6199999999998
n 11
R/ was used in method in 2008 for an amount of 5884.74 million and in
 I'm 26. 1997 to 2007. Forecast 2008 revenue as well as the period of
data to include.

x FORECAST MONTH
13 20085773.50364
14 20095829.12364
15 20105884.74364
16 20115940.36364

or linear regression, based on the results obtained, it is estimated that the return was 5773.50;
2009 of 5829.12 million; in 2010
in 2011 of 5940.36 million
MILLIONS)
5860

002 2003 2004 2005 2006 2007

Linear (REVENUE (MILLIONS))

exercise 27 Mark Price, new production manager at Speakers and Company, has to be sure that
the unit price of the product or the effects of greater marketing is what drives more
demand in his market. Relevant information is collected in the

a) Perform a regression analysis in Excel based on this data. c

b.) What variable, price or advertising, do you

know?
c.) Predict the average annual sales d in the
regression results, if the pre spent on
advertising (in

Linear Regression Analysis

YEAR Sales/Unit Unit price Advertising
1990 400 280 600
1991 700 215 835
1992 900 211 1100
1993 1300 210 1400
1994 1150 215 1200
1995 1200 200 1300
1996 900 225 900
1997 1100 207 1100
1998 980 220 700
1999 1234 211 900
2000 925 227 700
2001 800 245 690

B: The variable

C: SALES= 2191.337362-6.909379925X1+0.23851279X2
SALES= 411.041781217934 Sales 2002
Consider which variable most affects the demand for your line of stereo speakers. The main drivers of sales
are not there and you want to apply regression analysis to find out what happened in an extensive marketing
project that spanned the last 10 years and that was empty
following data: with your results answer the following questions.

n greatest effect on sales and as it was e speakers from Speaker and Company based on the price was $300
per unit and the amount was $900.
Summary

Regression Statistics
Correlation coefficient mu 0.85496914
Determination coefficient 0.73097223
Adjusted R^2 Typical error 0.67118828
Observations 146.623447
12
VARIANCE ANALYSIS
Quadradio degrees of freedom of the critical values of F
Regression 2 525718.334 262859.167 12.2268977 0.00271698
Waste 9 193485.916 21498.4351
Total 11 719204.25

Coefficients Typical error t-statistic Probability Lower 95% Top 95%

Interception 2191.33736 826.082598 2.65268554 0.02635991322.608696 4060.06603
Variable x 1 -6.90937993 2.91589073 -2.36956065 0.04193915 -13.505583-0.31317683
Variable X 2 0.32502044 0.23851279 1.36269605 0.2060985-0.21453298 0.86457386
lor of the slope is -6, (X2). On the other hand, the price and sales decrease.
lower 95.0%upper 95.0% 322.608696 4060.06603 -13.505583 -0.31317683
-0.21453298 0.86457386
 EXERCISE 28
Assume an initial Ft of 300 units, a trend of 8 units, an alpha of 0.30 and a 0.40. If actual demand
was finally 288, calculate the forecast for the next period.

Data Units
Forecast of with
F_0 300 the next alpha with beta
Trend 8 period 304.4 303.2
F_v 288
alpha 0.3
beta 0.4
delta of o.
EXERCISE 29
during the first six months of operation. If a simple average were used, what would
have been the May forecast?

PERIOD COMPLAINT PMS; N=3 R/: Using a moving average

JANUARY S 36 it is estimated that there will be a
forecast
FEBRUARY 45
MARCH 81
APRIL 90 72
MAY 10 93
JUNE 8 14 114
4

COMPLAINTS

MONTHS
 Connor Owen
vile to three months, over a period
three months, in the of 8 years.
month Estimate
of May the smoothness
there were value calculated
93 complaints.
at the end of 2001, using an exponential smoothing model with an alpha value of
0.20. Use the average demand from 1998 to 2000

YEAR OF WINE ME SES

1998 270 α 0.22
1999 356 270 _ (t-1) 270
2000 398 289.1 _(t-1) 270
2001 456 313.3 n 8
2002 358 345.0
2003 500 347.9
2004 410 381.7
2005 376 388.0

R/: using the exponential smoothing model, it was

estimated that the value calculated at the end of
2001 was 313.3 cases of merlot wine
S OF MERLOT WINE

2000 2001 2002 2003 2004

YEARS