Seasonal-Component Analysis:

To find out the best utilization of existing productive capacity when demand for other product is seasonal, it is necessary to determine the relative share of activity for each month or quarter in the planning horizon. This is best done by isolating the seasonal component S present in the demand data by month or quarter for the time series. The method utilized for this purpose involves determination of moving averages.

For a time series, a simple moving average of n periods represents a dynamic average that smoothes out the fluctuations observed in the N periods.