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

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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143 views5 pages

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

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.

Uploaded by

musicslave96
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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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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