Assignment 1
Industrial Management and Engineering Economy (IEng 5241)
Forecasting
1. Shipments (in tons) of a product by a producer are shown below:
Year 1 2 3 4 5 6 7 8 9 10 11
Tons 2 3 6 10 8 7 12 14 24 18 19
a) Graph the data, and comment on the relationship.
b) Compute a 3-year moving average, plot it as a dotted line and use it to forecast
shipments in year 12.
c) Using a weight of 3 for the most recent data, 2 for the next, and 1 for the oldest,
forecast shipments in year 12.
d) Use the least square method to develop a linear trend equation for the data. State
the equation and forecast a trend value for year 16. (i.e. this is not covered in class).
e) Using a simple exponential smoothing with 𝛼 = 0.2 find the 14 year forecast. Make
assumptions if you want.
2. A food processing company uses a moving average to forecast next month’s demand. Past
actual demand (in units) is as shown.
Month 43 44 45 46 47 48 49 50 51
Actual demand 105 106 110 110 114 121 130 128 137
a. Compute a simple 5- month moving average to forecast demand for month 52.
b. Compute a weighted 3-month moving average, where the weights are highest for
the latest months and descend in order of 3, 2 and 1.
3. Your manager is trying to determine what forecasting method to use. Based upon the
following historical data, calculate the following forecast and specify what procedure you
would utilize.
Month Actual Month Actual
demand demand
1 62 7 76
2 65 8 78
3 67 9 78
4 68 10 80
5 71 11 84
6 73 12 85
a) Calculate the simple three- month moving average forecast for periods 4-12.
b) Calculate the weighted three-month moving average using weights of 0.5, 0.3, and
0.2 for periods 4-12.
c) Calculate the single exponential smoothing forecast for periods 2-12 using an initial
forecast (f1) of 61 and 𝛼 of 0.30.
d) Calculate the exponential smoothing with trend component forecast for periods 2-
12 using an initial trend forecast (t1) of 1.8, an initial exponential smoothing
forecast (f1) of 60, an 𝛼 of 0.30.
4. Omar has heard from some of his customers that they will probably cut back on order sizes
in the next quarter. The company he works for has been reducing its sales force due to
falling demand and he worries that he could be next if his sales begin to fall off. Believing
that he may be able to convince his customers not to cut back on orders, he turns in an
optimistic forecast of his next quarter sales to his manager. What are the pros and cons of
doing that?
Note:
Better to use MS Excel for plotting and other works but you need to submit the hand written
document.
Your work will be interesting if it is well explained and necessary steps are followed.
