Example of Exponential Smoothing

By using the previous example and smoothing constant 0.3 generate monthly forecasts

Solution

Since there were no forecasts before January we take Jan to be the forecast for February.

∴ Feb - 1200

For March;

March forecast = Feb forecast + 0.3 ( Feb sales - Feb forecast)

= 1200 + 0.3 (1280 - 1200) =1224

Note:

• The value a lies between 1 and 0.
• The higher a value, the extra forecast is sensitive to the current status.