Question

Assume an initial starting Ft of 300 units, a trend (Tt ) of eight units, an alpha of 0.30, and a delta of 0.40. If actual demand turned out to be 288, calculate the forecast for the next period?

Short answer

Answer

The forecast for the next period = is 307.6

Step-by-step solution

Definition of Forecast

Forecastingis the technique of predicting the future based on past and present data. This is the most typical trend analysis approach. Businesses use a mix of historical facts, data, and a little intuition to forecast future demand based on previous and present supply.

Forecasting strengthens a company's supplier connections and guarantees that the correct quantity of cargo is scheduled to minimize needless expenses. The most essential thing you'll learn is how to prepare for both expected and unexpected interruptions.

Explanation

$\begin{array}{rcl}{F}_t& =& 300\\ T_t& =& 8\\ \alpha & =& .30\\ \delta & =& .40\\ A_t& =& 288\end{array}$

$\begin{array}{rcl}FI{T}_t& =& F_t+T_t=300+8=308\\ F_{t+1}& =& FI{T}_t+\alpha \left(A_t-FI{T}_t\right)=308+.3\left(288-308\right)=308-6=302\\ T_{t+1}& =& T_t+\delta \left(F_{t+1}-FI{T}_t\right)=8+.4\left(302-308\right)=8-2.4=5.6\\ FI{T}_{t+1}& =& F_{t+1}+T_{t+1}=302+5.6=307.6\\ & & \end{array}$

The forecast for the next period = 307.6