Given a previous forecast value of 99, actual demand of 103, and an alpha of .4, what would be the exponential smoothing forecast for the next period?

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To find the exponential smoothing forecast for the next period, you can use the formula:

Forecast for next period = (α * Actual Demand) + ((1 - α) * Previous Forecast)

In this case, you have:

  • Previous forecast = 99
  • Actual demand = 103
  • Alpha (α) = 0.4

Now substituting the values into the formula:

  1. Calculate the contribution from the actual demand: α * Actual Demand = 0.4 * 103 = 41.2

  2. Calculate the contribution from the previous forecast: (1 - α) * Previous Forecast = 0.6 * 99 = 59.4

  3. Add these two contributions together to get the new forecast: Forecast for next period = 41.2 + 59.4 = 100.6

Therefore, the exponential smoothing forecast for the next period is 100.6. This value represents a blend of the most recent actual demand and the previous forecast, adjusted by the smoothing factor, alpha. The choice of 100.6 reflects a more recent demand trend while still considering past forecasts, which is a key characteristic of exponential smoothing.