Question

The sales data of a product for 5 years are

Year	2014	2015	2016	2017	2018
Sales (units)	280	268	259	270	287

Assume the forecast for the year 2014 as 260 units. Using an exponential smoothing method with smoothing constant α = 0.5, the sales forecast (units) for the year 2019, is ______

Answer 1

Concept:

Exponential Smoothing Method:

• In exponential smoothing method of forecast, the forecast for the next period is equal to
  Ft = α Dt - 1 + (1 - α) Ft - 1 = F_{t - 1} + α(Dt - 1 - Ft - 1)

Where, Dt-1 = latest figure sale or latest demand, Ft-1 = old forecast and α = smoothing constant

Calculation:

Given:

The sales of the particular years are given and the forecast for the year 2014, F₂₀₁₄ = 260 units.

∴ The forecast  for the year 2015,

F₂₀₁₅ = F₂₀₁₄ + α(D₂₀₁₄ - F₂₀₁₄) 

⇒ 260 + 0.5(280 - 260) = 270 units.

∴ The forecast  for the year 2016,

F2016 = F2015 + α(D2015 - F2015) 

⇒ 270 + 0.5(268 - 270) = 269 units.

∴ The forecast  for the year 2017,

F2017 = F2016 + α(D2016 - F2016) 

⇒ 269 + 0.5(259 - 269) = 264 units.

∴ The forecast  for the year 2018,

F2018 = F2017 + α(D2017 - F2017) 

⇒ 264 + 0.5(270 - 264) = 267 units.

∴ The forecast  for the year 2019,

F2019 = F2018 + α(D2018 - F2018) 

⇒ 267 + 0.5(287 - 267) = 277 units.

∴ The sales forecast for the year 2019, is 277 units.