Refer to Problem 4.2. Develop a forecast for years 2 through 12 using exponential smoothing with a = .4 and a forecast for year 1 of 6. Plot your new forecast on a graph with the actual data and the naive forecast. Based on a visual inspection, which forecast is better?

Problem 4.2

a) Plot the above data on a graph. Do you observe any trend, cycles, or random variations?

b) Starting in year 4 and going to year 12, forecast demand using a 3-year moving average. Plot your forecast on the same graph as the original data.

c) Starting in year 4 and going to year 12, forecast demand using a 3-year moving average with weights of .1, .3, and .6, using .6 for the most recent year. Plot this forecast on the same graph.

d) As you compare forecasts with the original data, which seems to give the better results?

The actual demand for the patients at Omaha Emergency Medical Clinic for the first 6 weeks of this year follows:

Clinic administrator Marc Schniederjans wants you to forecast patient demand at the clinic for week 7 by using this data. You decide to use a weighted moving average method to find this forecast. Your method uses four actual demand levels, with weights of 0.333 on the present period, 0.25 one period ago, 0.25 two periods ago, and 0.167 three periods ago.

a) What is the value of your forecast?

b) If instead the weights were 20, 15, 15, and 10, respectively, how would the forecast change? Explain why.

c) What if the weights were 0.40, 0.30, 0.20, and 0.10, respectively? Now what is the forecast for week 7?