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Forecasting

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The Jersey Dairy Products Company produces cheese, which it sells to supermarkets and food-processing companies. Because of concerns about cholesterol and fat in cheese, the company has seen demand for its products decline during the past decade . It is now considering introducing some alternative low-fat dairy products and wants to determine how much available plant capacity it will have next year. The company has developed an exponential smoothing forecast with ?ï? = .40 to forecast cheese. The actual demand and the forecasts from the model are as follows:
Year Demand (1,000 lb.) Forecast
1 16.8
2 14.1 16.8
3 15.3 15.7
4 12.7 15.5
5 11.9 14.4
6 12.3 13.4
7 11.5 12.9
8 10.8 12.4

Assess the accuracy of the forecast model by using MAD and cumulative error. If the exponential smoothing forecast model does not appear to be accurate, determine whether a linear trend model would provide a more accurate forecast.

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Solution Summary

This solution compares an exponential smoothing forecast model versus a linear trend model.

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