1. Time Series Forecasts
Trend - long-term upward or downward movement in data.
Seasonality - short-term fairly regular variations in data related to factors like weather, festive holidays and vacations.
Cycle – wavelike variations of more than one year’s duration these occurs because of political, economic and even agricultural conditions.

2. Time Series Forecasts
Irregular variations - caused by unusual circumstances such as severe weathers, earthquakes, worker strikes, or major change in product or service.
Random variations - caused by chance and are in reality are the residual variations that remain after the other behaviors have been identified and accounted for.

3. Forecast Variations
Figure 3.1
Irregular variation
Trend

4. Forecast Variations
Figure 3.1
Cycles
Cycles

5. Forecast Variations
Figure 3.1 90 89 88
Seasonal variations

6. Techniques for Averaging
Moving average
Weighted moving average
Exponential smoothing

7. Moving Averages
Moving average – A technique that averages a number of recent actual values, updated as new values become available.
Weighted moving average – More recent values in a series are given more weight in computing the forecast.

8. Simple Moving Average Formula
The simple moving average model assumes an average as a good estimator of future behavior
The formula for the simple moving average is:
Ft = Forecast for the coming period
N = Number of periods to be averaged
A t-1 = Actual occurrence in the past period for up to “n” periods 15

9. Simple Moving Average Problem (1)
Question: What are the 3-week and 6-week moving average forecasts for demand?
Assume you only have 3 weeks and 6 weeks of actual demand data for the respective forecasts 15

10. Calculating the moving averages gives us:10
Calculating the moving averages gives us:
F4=( )/3
=682.67
F7=(
)/6
=768.67
The McGraw-Hill Companies, Inc., 2004 16

11. 17

12. Simple Moving Average Problem (2) Data
Question: What is the 3 week moving average forecast for this data?
Assume you only have 3 weeks and 5 weeks of actual demand data for the respective forecasts 18

13. Simple Moving Average Problem (2) Solution
F4=( )/3
=758.33
F6=(
)/5
=710.00 19