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# Operations Management: Calculate MAD and MSE for exponential smoothing

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See the attached file.

Your boss recently returns from a conference and wants to start forecasting. He asks the following:

1. Should the division be using moving average, weighted average or expotential smoothing in forecasting calculations? What are the advantages of all options of forecasting.

2. The Director of Supplies needs help in forecasting. Develope forecasts for periods six-24 using MA with 3 periods, 4periods and 5 periods

Calculate the MAD and MSE for all of the forecasts. Start MAD and MSE calculations for exponential smoothing in period 5. Start MAD and MSE calculations for weighted averages in period 5.

the chart is in the attached file.

#### Solution Preview

See the attached Excel file.

Part 1

A Moving Average method is very easy to understand, all periods are given equal weights and the forecast is simply the average of the previous points. Weighted averages allow the forecaster to assign weights based on their knowledge or past trends in the data, for example it may be better to forecast quarterly sales using a larger weight on sales activity in the ...

#### Solution Summary

The Excel file shows the work and then the narrative statement of 268 words explains the calculations.

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## Operations Management

1. Explain exponential smoothing and what the MAD and MSE scores mean in the attached spreadsheet.

The original assignment was as follows.
Your Director of Supply Chain needs help in developing forecasts. Choose one of the following three options.
Develop forecasts for periods 6 through 24 using MA with 3 periods, 4 periods, and 5 periods, or...
Develop forecasts for periods 3 through 24 using a smoothing factor of 0.2 and 0.3, or...
Develop forecasts for periods 5 through 24 using weighted moving average with weights of 0.4, 0.3, 0.2, and 0.1.
Calculate the MAD and MSE for all of your forecasts. Start MAD and MSE calculations for moving averages in period 6. Start MAD and MSE calculations for exponential smoothing in period 5. Start MAD and MSE calculations for Weighted Averages in period 5.
Just need help with Item 1.

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