Jim's department at a local department store has tracked the sales of a product over the last ten weeks. Forecast demand using exponential smoothing with an alpha of 0.4, and an initial forecast of 28.0 for period 1. Calculate the MAD
Calculate the tracking signal. What do you recommend?
Period Demand
1 24
2 23
3 26
4 36
5 26
6 30
7 32
8 26
9 25
10 28
Period Demand Forecast Error Absolute
1 24 28.00
2 23 26.40 -3.40 3.40
3 26 25.04 0.96 0.96
4 36 25.42 10.58 10.58
5 26 29.65 -3.65 3.65
6 30 28.19 1.81 1.81
7 32 28.92 3.08 3.08
8 26 30.15 -4.15 4.15
9 25 28.49 -3.49 3.49
10 28 27.09 0.91 0.91
Total 2.64 32.03
Average 0.29 3.56
Bias MAD
The tracking signal RSFE/MAD = 2.64/3.56 = .742 is low; therefore, keep using the forecasting method.
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