Question

Simple exponential smoothing is being used to forecast demand. The previous forecast of 66 turned out to be four units less than actual demand. The next forecast is 66.6, implying a smoothing constant, alpha, equal to _____ ? The answer is alpa 15, but how did you get the answer?

Answer 1

Answer:

15

Explanation:

Using the Exponential smoothing model below:-

Ft= Ft-1 + α (At-1 – Ft-1)

Where,

Ft= new forecast

Ft-1= previous period forecast

At-1= previous period actual demand

α =?     Ft-1=66    At-1=70        Ft= 66.6

Ft = 66 + α (70-66)

   66.6 = 66+ 4* α

   (66.6-66)= 4* α

   α = 0.6/4

     α = 0.15

Thus, alpha value will be 0.15 for simple exponential smoothing.