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    Chapter 8 - Solutions Problem 2:: N Forecast Actual Forecast Actual Forecast Actual

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    This document summarizes solutions to problems from Chapter 8 of the textbook SOM 306 – Operations Management. It provides examples of using different forecasting methods like moving averages, exponential smoothing, and regression analysis to forecast demand. It compares the accuracy of these methods using error metrics like MAD and MSE. The key results are that shorter term moving averages and exponential smoothing with lower alpha values generally provide more accurate forecasts according to these error metrics.

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    Chapter 8 - Solutions Problem 2:: N Forecast Actual Forecast Actual Forecast Actual

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    musicslave96
    84 views5 pages
    This document summarizes solutions to problems from Chapter 8 of the textbook SOM 306 – Operations Management. It provides examples of using different forecasting methods like moving averages, exponential smoothing, and regression analysis to forecast demand. It compares the accuracy of these methods using error metrics like MAD and MSE. The key results are that shorter term moving averages and exponential smoothing with lower alpha values generally provide more accurate forecasts according to these error metrics.

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    This document summarizes solutions to problems from Chapter 8 of the textbook SOM 306 – Operations Management. It provides examples of using different forecasting methods like moving averages, exponential smoothing, and regression analysis to forecast demand. It compares the accuracy of these methods using error metrics like MAD and MSE. The key results are that shorter term moving averages and exponential smoothing with lower alpha values generally provide more accurate forecasts according to these error metrics.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    84 views5 pages

    Chapter 8 - Solutions Problem 2:: N Forecast Actual Forecast Actual Forecast Actual

    Uploaded by

    musicslave96
    This document summarizes solutions to problems from Chapter 8 of the textbook SOM 306 – Operations Management. It provides examples of using different forecasting methods like moving averages, exponential smoothing, and regression analysis to forecast demand. It compares the accuracy of these methods using error metrics like MAD and MSE. The key results are that shorter term moving averages and exponential smoothing with lower alpha values generally provide more accurate forecasts according to these error metrics.

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    © All Rights Reserved
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    Download as doc, pdf, or txt
    of 5

    SOM 306 – Operations Management

    A. Dechter
    Chapter 8 - Solutions

    Problem 2:

    Naïve Method: F6 = A5 = 460


    Simple Average: F6 = (A1+A2+A3+A4+A5)/5 = (432+396+415+458+460)/5 =
    432.2 ≈ 432
    3-Period Moving Average: F6 = (A3+A4+A5)/3 = (415+458+460)/3 = 444.3 ≈ 444

    Problem 3:

    a. 3-Period Moving Average: FJune = (AMarch +AApril+AMay)/3 = (38+39+43)/3 = 40


    5-Period Moving Average: FJune = (AJanuary+AFebruary+AMarch +AApril+AMay)/5
    =(32+41+38+39+43)/5 = 38.6 ≈ 39

    b. Naïve: FJune= AMay = 43

    c. 3-Period Moving Average: FJuly = (AApril +AMay+AJune)/3 = (39+43+41)/3 = 41


    5-Period Moving Average: FJuly = (AFebruary+AMarch +AApril+AMay +AJune)/5
    =(41+38+39+43+41)/5 = 40.4 ≈ 40
    Naïve: FJuly=AJune= 41

    d.
    Month Actual 3-Period Absolute 5-Period Absolute Naïve Absolute
    Moving Error Moving Error Error
    Average Average
    January 32
    February 41 32 9
    March 38 41 3
    April 39 37 2 38 1
    May 43 39 4 39 4
    June 41 40 1 39 2 43 2

    MAD(3-period moving average) =  Actual  Forecast = (2+4+1)/3 = 2.33


    n

    MAD(5-period moving average)=  Actual  Forecast


    = 2/1 = 2
    n

    MAD(Naïve) =  Actual  Forecast = (9+3+1+4+2)/5 = 3.8


    n

    The 5-period moving average provides the best historical fit using the MAD criterion and
    would be better to use.

    e.
    SOM 306 – Operations Management
    A. Dechter
    Month Actual 3-Period Squared 5-Period Squared Naïve Squared
    Moving Error Moving Error Error
    Average Average
    January 32
    February 41 32 81
    March 38 41 9
    April 39 37 4 38 1
    May 43 39 16 39 16
    June 41 40 1 39 4 43 4

    MSE(3-period moving average) = �(Actual  Forecast)2


    = (4+16+1)/3= 7
    n
    MSE(5-period moving average)= �(Actual  Forecast)2 = 4/1 = 4
    n
    MSE(Naïve) = �(Actual  Forecast)2
    = (81+9+1+16+4)/5 = 111/5 = 22.2
    n

    The 5-period moving average provides the best historical fit using the MSE criterion.

    Problem 5:

    Forecasts using  = 0.1:


    Exponential Absolute
    Week Demand Smoothing Error
    1 330 330
    2 350 330 20
    3 320 332 12
    4 370 331 39
    5 368 335 33
    6 343 338 5
    MAD: 21.8

    Forecasts using  = 0.7:


    Exponential Absolute
    Week Demand Smoothing Error
    1 330 330
    2 350 330 20
    3 320 344 24
    4 370 327 43
    5 368 357 11
    6 343 365 22
    MAD: 24

    Using  = 0.1 provides a better historical fit based on the MAD criterion.

    Problem 8:
    SOM 306 – Operations Management
    A. Dechter

    A December = 1100 units/month


    S Nov = 1000 units/month
    T Nov = 200 units/month
     = 0.20
     = 0.10

    Step 1: Smoothing the level of the series

    S Dec = A Dec + (1 - )(S Nov + T Nov) = 0.20(1100) + 0.80(1200) = 1180 units

    Step 2: Smoothing the trend

    T Dec = (S Dec – S Nov) + (1 - )T Nov = 0.10(1180 – 1000) + 0.90(200) = 198 units

    Step 3: Forecast including trend

    FIT = S Dec + T Dec = 1180 + 198 = 1378 units

    Problem 9:

    Step 1: Average demand for each season:

    Year 1: 2840/4 = 710


    Year 2: 3241/4 = 810.25

    Step 2: Seasonal index for each season:

    Season Year 1 Year 2


    Fall 200/710 = 0.282 230/810.25 = 0.284
    Winter 1400/710 = 1.972 1600/810.25 = 1.975
    Spring 520/710 = 0.732 580/810.25 = 0.716
    Summer 720/710 = 1.014 831/810.25 = 1.026

    Step 3: Average seasonal index for each season:

    Fall 0.283
    Winter 1.973
    Spring 0.724
    Summer 1.020

    Step 4: Average demand per season = 4000/4 = 1000

    Step 5: Multiply next year’s average seasonal demand by each seasonal index

    Quarter Forecast
    SOM 306 – Operations Management
    A. Dechter
    Fall (1000)( 0.283) = 283
    Winter (1000)( 1.973) = 1973
    Spring (1000)( 0.724) = 725
    Summer (1000)( 1.020) = 1020

    Problem 14:

    Step 1:
    Average demand for each quarter for year 1 = (352+156+489+314)/4 = 327.75
    Average demand for each quarter for year 2 = (391+212+518+352)/4 = 368.25

    Step 2:
    Compute a seasonal index for every season of every year:
    Quarter Year 1 Year 2
    Fall 352/327.75 = 1.07 391/368.25 = 1.06
    Winter 156/327.75 = 0.48 212/368.25 = 0.58
    Spring 489/327.75 = 1.49 518/368.25 = 1.41
    Summer 314/327.75 = 0.96 352/368.25 = 0.95

    Step 3:
    Calculate the average seasonal index for each season:

    Quarter Average Seasonal Index


    Fall (1.07+1.06)/2 = 1.065
    Winter (0.48+0.58)/2 = 0.53
    Spring (1.49+1.41)/2 = 1.45
    Summer (0.96+0.95)/2 = 0.955

    Step 4:
    Calculate the average demand per season for next year = 1525/4 = 381.25

    Step 5:
    Multiply next year’s average seasonal demand by each seasonal index
    Quarter Forecast
    Fall (381.25)(1.065) = 406.03 ≈ 406
    Winter (381.25)(0.53) = 202.06 ≈ 202
    Spring (381.25)(1.45) = 552.81 ≈ 553
    Summer (381.25)(0.955) = 364.09 ≈ 364

    Problem 16:
    Given: T4 = 20, A5 = 90, S4 = 85

    Step 1:
    Smoothing the level of the series:
    S5 = A5 + (1 - )(S4 + T4) = 0.20(90) + 0.80(85 + 20) = 102

    Step 2:
    SOM 306 – Operations Management
    A. Dechter
    Smoothing the trend:
    T5 = (S5-S4) + (1 - )T4 = 0.10(102 – 85) + 0.90(20) = 19.7

    Step 3:
    Forecast Including Trend
    FIT6 = S5 + T5 = 102 + 19.7 = 121.7

    Problem 17:

    Regression model: Clinic attendance = 3.011 + 0.489 month

    F9 = 3.011 + 0.489 (9) = 7.412 attendees (in thousands)


    F10 = 3.011 + 0.489 (10) = 7.901 attendees (in thousands)

    Problem 18:

    Using the MAD Criterion:

    Period Actual Forecast Absolute Forecast Absolute


    alpha 0.2 Error alpha 0.5 Error
    1 15 17 2 17 2
    2 18 17 1 16 2
    3 14 17 3 17 3
    4 16 16 0 16 0
    5 13 16 3 16 3
    6 16 15 1 15 1

    MAD: 1.67 MAD: 1.83

    Exponential smoothing using  = 0.2 yields lower MAD.

    Using the MSE criterion:

    Period Actual Forecast Squared Forecast Squared


    alpha 0.2 Error alpha 0.5 Error
    1 15 17 4 17 4
    2 18 17 1 16 4
    3 14 17 9 17 9
    4 16 16 0 16 0
    5 13 16 9 16 9
    6 16 15 1 15 1

    MSE: 4 MSE: 5.4

    Exponential smoothing using  = 0.2 yields lower MSE.

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