Period Month Sales

1 Jan 37
2 Feb 40 Sales Time Series
3 Mar 41
4 Apr 37 60
5 May 45
6 June 50 50

Sales
7 July 43
40
8 Aug 47
9 Sep 56 30
10 Oct 52
11 Nov 55 20
12 Dec 54
10

0
1 2 3 4 5 6 7 8 9 10 11 12
Time
9 10 11 12
Trend Model (Fit a line to the time series data)

Squared Percent
period month sales forecast error ABS(error) Error Error Foreca
1 Jan 37 36.94 0.06 0.06 0.00 0.00

Sales
2 Feb 40 38.66 1.34 1.34 1.80 0.03 60
3 Mar 41 40.38 0.62 0.62 0.38 0.02 50
4 Apr 37 42.11 -5.11 5.11 26.08 0.14 40
5 May 45 43.83 1.17 1.17 1.37 0.03 30
6 June 50 45.55 4.45 4.45 19.76 0.09
20
7 July 43 47.28 -4.28 4.28 18.31 0.10
8 Aug 47 49.00 -2.00 2.00 4.01 0.04 10
9 Sep 56 50.73 5.27 5.27 27.81 0.09 0
10 Oct 52 52.45 -0.45 0.45 0.20 0.01 1 2 3 4 5 6
11 Nov 55 54.17 0.83 0.83 0.68 0.02 T
12 Dec 54 55.90 -1.90 1.90 3.60 0.04
0.00 2.29 8.67 0.05
BIAS MAD MSE MAPE
Method 1: Use Excel's function
a= 35.21212
b= 1.723776

Method 2: Use Chart Trendline

60

50 f(x) = 1.7237762238x + 35.2121212121

Sales

40

30

20

10

0
0 2 4 6 8 10 12 14
Time

Method 3: Use Excel's Data Analysis | Regression tool

Question: What are the forecasts for next January, Febary, and April?
 Forecast vs. Actual
Sales

60
50
40 sales
30 forecast
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12
Time
Naïve Model

Squared Percent
period month sales forecast error ABS(error) Error Error
Forecast vs
1 Jan 37 - - - - -

Sales
2 Feb 40 37.00 3.00 3.00 9.00 0.08 60
3 Mar 41 40.00 1.00 1.00 1.00 0.02
4 Apr 37 41.00 -4.00 4.00 16.00 0.11 40
5 May 45 37.00 8.00 8.00 64.00 0.18
20
6 June 50 45.00 5.00 5.00 25.00 0.10
7 July 43 50.00 -7.00 7.00 49.00 0.16 0
8 Aug 47 43.00 4.00 4.00 16.00 0.09 1 2 3 4 5 6 7
9 Sep 56 47.00 9.00 9.00 81.00 0.16 Time
10 Oct 52 56.00 -4.00 4.00 16.00 0.08
11 Nov 55 52.00 3.00 3.00 9.00 0.05
12 Dec 54 55.00 -1.00 1.00 1.00 0.02
1.55 4.45 26.09 0.09
BIAS MAD MSE MAPE

Question: What is the forecast for next January? Feberary?

 Forecast vs. Actual
Sales

60
40 sales
forecast
20
0
1 2 3 4 5 6 7 8 9 10 11
Time
Moving Average Model

(1) Simple MA models

3-month 4-month
MA MA
period month sales forecast error ABS(error) forecast error ABS(error)
1 Jan 37 - - - - - -
2 Feb 40 - - - - - -
3 Mar 41 - - - - - -
4 Apr 37 39.33 -2.33 2.33 - - -
5 May 45 39.33 5.67 5.67 38.75 6.25 6.25
6 June 50 41.00 9.00 9.00 40.75 9.25 9.25
7 July 43 44.00 -1.00 1.00 43.25 -0.25 0.25
8 Aug 47 46.00 1.00 1.00 43.75 3.25 3.25
9 Sep 56 46.67 9.33 9.33 46.25 9.75 9.75
10 Oct 52 48.67 3.33 3.33 49.00 3.00 3.00
11 Nov 55 51.67 3.33 3.33 49.50 5.50 5.50
12 Dec 54 54.33 -0.33 0.33 52.50 1.50 1.50

3.11 3.93 25.56 4.78 4.84 33.98

BIAS MAD MSE BIAS MAD MSE

Question: What is the forecast for next January?

(2) Weighted MA model

Weights
w1 = 0.5000
w2 = 0.3333
w3 = 0.1667
3-month
WMA Squared Percent
period month sales forecast error ABS(error) Error Error
1 Jan 37 - - - - -
2 Feb 40 - - - - -
3 Mar 41 - - - - -
4 Apr 37 40.00 -3.00 3.00 9.00 0.08
5 May 45 38.83 6.17 6.17 38.03 0.14
6 June 50 41.67 8.33 8.33 69.44 0.17
7 July 43 46.17 -3.17 3.17 10.03 0.07
8 Aug 47 45.67 1.33 1.33 1.78 0.03
9 Sep 56 46.17 9.83 9.83 96.69 0.18
10 Oct 52 50.83 1.17 1.17 1.36 0.02
11 Nov 55 52.50 2.50 2.50 6.25 0.05
12 Dec 54 54.17 -0.17 0.17 0.03 0.00
2.56 3.96 25.85 0.08
BIAS MAD MSE MAPE
Question: What is the forecast for next January?
 Forecast vs. Actual
Sales

60.00
sales
40.00
3-month MA
20.00 forecast
0.00 4-month MA
1 2 3 4 5 6 7 8 forecast
Time
Simple Exponential Smoothing

Alpha = 0.3 Alpha = 0.5

period month sales forecast error ABS(error) forecast error ABS(error)

1 Jan 37 37.00 - - 37.00 - -
2 Feb 40 37.00 3.00 3.00 37.00 3.00 3.00
3 Mar 41 37.90 3.10 3.10 38.50 2.50 2.50
4 Apr 37 38.83 -1.83 1.83 39.75 -2.75 2.75
5 May 45 38.28 6.72 6.72 38.38 6.63 6.63
6 June 50 40.30 9.70 9.70 41.69 8.31 8.31
7 July 43 43.21 -0.21 0.21 45.84 -2.84 2.84
8 Aug 47 43.15 3.85 3.85 44.42 2.58 2.58
9 Sep 56 44.30 11.70 11.70 45.71 10.29 10.29
10 Oct 52 47.81 4.19 4.19 50.86 1.14 1.14
11 Nov 55 49.07 5.93 5.93 51.43 3.57 3.57
12 Dec 54 50.85 3.15 3.15 53.21 0.79 0.79
4.48 4.85 34.15 3.02 4.04
BIAS MAD MSE BIAS MAD

Question: What is the forecast for next January?

 Forecast vs. Actual
Squared Percent
Error Error
- - 60.00
9.00 0.08
6.25 0.06 50.00
7.56 0.07 Sales
43.89 0.15 40.00
sales
69.10 0.17
8.09 0.07 30.00 Fcst (alpha=0.3)
6.65 0.05 Fcst (alpha=0.5)
105.86 0.18 20.00
1.31 0.02
12.76 0.06 10.00
0.62 0.01
24.64 0.08 0.00
MSE MAPE 1 2 3 4 5 6 7 8 9 10 11 12
Time
alpha=0.3)
alpha=0.5)
Holt's Model

alpha = 0.50
beta = 0.30
Squared
period month sales level trend forecast error ABS(error) Error
1 Jan 37 37 0 - - - -
2 Feb 40 37 0 37.00 3.00 3.00 9.00
3 Mar 41 38.50 0.45 38.95 2.05 2.05 4.20
4 Apr 37 39.98 0.76 40.73 -3.73 3.73 13.93
5 May 45 38.87 0.20 39.06 5.94 5.94 35.24
6 June 50 42.03 1.09 43.12 6.88 6.88 47.33
7 July 43 46.56 2.12 48.68 -5.68 5.68 32.26
8 Aug 47 45.84 1.27 47.11 -0.11 0.11 0.01
9 Sep 56 47.05 1.25 48.31 7.69 7.69 59.20
10 Oct 52 52.15 2.41 54.56 -2.56 2.56 6.55
11 Nov 55 53.28 2.02 55.30 -0.30 0.30 0.09
12 Dec 54 55.15 1.98 57.13 -3.13 3.13 9.78
0.91 3.73 19.78
BIAS MAD MSE

Question: What is the forecast for next January?

Percent Forecast vs. Actual
Error
-
60
0.08
0.05 Sales 50
0.10
0.13 40
sales
0.14 30 forecast
0.13
0.00 20
0.14
10
0.05
0.01 0
0.06 1 2 3 4 5 6 7 8 9 10 11
0.08 Time
MAPE
Model Comparison and Selection

Models BIAS MAD MSE MAPE

Trend 0.00 2.29 8.67 0.05
Naïve 1.55 4.45 26.09 0.09
Moving Avg 2.56 3.96 25.85 0.08 (best weighted moving average with n=3)
Exponential Smoothing 2.57 3.85 23.48 0.08 (using Solver to find the best alpha=0.599 which minim
Holt's 0.91 3.73 19.78 0.08 (with alpha=0.5 and beta=0.3)
g average with n=3)
he best alpha=0.599 which minimizes MAD)