Business
Data Graph
Naïve/Simple Average/Exponential Smoothning
Below we have highlighted the outcome of the forecasting models along with MAD of each model. It is evident that of the three forecasting model, exponential smoothning offers least MAD.
Considering Other Forecasting Errors
Yes, apart from MAD, we should also consider other measures of forecasting errors such as Mean Absolute Percentage Error(MAPE). This will help us in comparing the models on two different parameters relating to error measurement.
Other Models
For the purpose of reducing the mean absolute deviation, we have used 4-year moving average, weighted average moving average, seasonal indicing and least regression measure. The outcome of the model is highlighted below,while the comprehensive calculations are available in the excel sheet:
Graphing and comparing other models
As we may see, the mean absolute deviation is minimal for seasonal indicing method.
Trendline of actual data and Equation
The regression equation of the data is, Y= 515.15+ 347.03X, while the forecast value for period using the given equation is 026.54. On the other hand, R-square multiple of the model is 92.95%, which confirms that there is a high correlation between the quarter and demand, and thus proves that the model works well.
Seasoning Indice Model
Forecasting Demand for Period 13-17
Assuming total demand for year 4 to be 4500 and for year 5 to be 5000 and using the calculated seasonal indices above,the forecasted demand for period 13-17 is:
Qualitative Considerations
In addition to the quantitative forecasting, the company also consider using qualitative methods such as Delphi Method. As part of this model, the company will need to ask field experts about their opinion on the relation between quarter period and demand. Later, the company can use the collected data for forecasting.
Suggested Model
We will suggest Seasonal Indicing model to Mignon as this model provides least error terms and MAD, and is thus the most reliable forecasting method.
References
"Welcome To Forecast Pro - Software For Sales Forecasting, Inventory Planning, Demand Planning, S&OP And Collaborative Planning.". Forecastpro.com. N.p., 2016. Web. 18 Mar. 2016.
Beattie, Andrew. "The Basics Of Business Forecasting | Investopedia". Investopedia. N.p., 2011. Web. 18 Mar. 2016.
