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Exponential Smoothing

This document discusses simple exponential smoothing techniques for forecasting. It presents two strategies for initializing the forecasting model: 1) using the first period's actual value, and 2) using a 3-period moving average. Graphs and an error comparison show that initializing with a moving average results in forecasts that more closely track actual demand over time.

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Isabel Del Mar Rivera
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86 views9 pages

Exponential Smoothing

This document discusses simple exponential smoothing techniques for forecasting. It presents two strategies for initializing the forecasting model: 1) using the first period's actual value, and 2) using a 3-period moving average. Graphs and an error comparison show that initializing with a moving average results in forecasts that more closely track actual demand over time.

Uploaded by

Isabel Del Mar Rivera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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EXPONENTIAL

SMOOTHING
IMEN 407
Simple Exponential
Smoothing
Frequently used
Uses weights
Model:

xt , S xt (1 )at 1
xt 1 xt (1 )at 1
Suavizacin exponencial
simple
How to determine a?
Use this formula where N is the number of periods

2

( N 1)
Strategy #1: Using the first period to
initialize
t Dt Forecast
1 52

2 48 52.00

3 36 51.20

4 49 48.16

5 65 48.33

6 54 51.66

7 60 52.13

8 48 53.70

9 51 52.56

10 62 52.25

11 66 54.20

12 62 56.56

Alpha 0.2
Demand and forecast

Demand vs Forecast (SES)


70

60

50

40
Axis Title

30

20

10

0
1 2 3 4 5 6 7 8 9 10 11 12
Strategy #2: Using moving average to
initialize (m=3)

Forecas
t Dt t
1 52
2 48
3 36

4 49 45.33

5 65 46.07

6 54 49.85

7 60 50.68

8 48 52.55

9 51 51.64

10 62 51.51

11 66 53.61

12 62 56.09

Alpha 0.2
Demand and forecast

Demand vs Forecast (SES)


70

60

50

40
Axis Title

30

20

10

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

Demand vs Forecast (SES)


70

60

50

40
Axis Title

30

20

10

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

Error comparison
25

20

15

10

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

-10

-15

-20

Strat1 Strat2

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