P
Peter Robertson
According to my text books, the exponential smoothing formula is:
Forecast for the next period = alpha * actual demand in current period + (1
- alpha) * forecast for current period.
So if the actual demand for the current period is say 10 units and the
forecast for the current period is say 7 units and alpha = 0.3, then the
forecast for the next period = 0.3 * 10 + (1 - 0.3) * 7 = 7.9 units.
Excel though, calculates the forecast for the next period as (1 - 0.3) * 10
+ 0.3 * 7 = 9.1, if you enter a 'damping factor' of 0.3.
I have a suspicion that the 'damping factor' Excel uses is = 1 - alpha (i.e.
high 'damping' with low values of alpha and low 'damping' with high values of
alpha), but the Excel help documentation does not tell me this. Can anyone
confirm this please?
It is a trap for young player perhaps and it seems that dear old Messrs
Wisner, Leong and Tan who wrote the text 'Principles of Supply Chain
Management' have been caught out (pp. 135)!!
Forecast for the next period = alpha * actual demand in current period + (1
- alpha) * forecast for current period.
So if the actual demand for the current period is say 10 units and the
forecast for the current period is say 7 units and alpha = 0.3, then the
forecast for the next period = 0.3 * 10 + (1 - 0.3) * 7 = 7.9 units.
Excel though, calculates the forecast for the next period as (1 - 0.3) * 10
+ 0.3 * 7 = 9.1, if you enter a 'damping factor' of 0.3.
I have a suspicion that the 'damping factor' Excel uses is = 1 - alpha (i.e.
high 'damping' with low values of alpha and low 'damping' with high values of
alpha), but the Excel help documentation does not tell me this. Can anyone
confirm this please?
It is a trap for young player perhaps and it seems that dear old Messrs
Wisner, Leong and Tan who wrote the text 'Principles of Supply Chain
Management' have been caught out (pp. 135)!!