Using exponential smoothing, if the actual demand is 61 and the previous forecast is 58 with an alpha of 0.3, what is the forecast for the next period?

To determine the forecast for the next period using exponential smoothing, the formula is:

Forecast for next period = (Alpha × Actual demand) + ((1 - Alpha) × Previous forecast)

Given the values:

• Actual demand = 61
• Previous forecast = 58
• Alpha = 0.3

Now, plugging these values into the formula:

Forecast for next period = (0.3 × 61) + (0.7 × 58)

Calculating each component:

1. 0.3 × 61 = 18.3
2. 0.7 × 58 = 40.6

Now, adding those results together: 18.3 + 40.6 = 58.9

Thus, the forecast for the next period is correctly calculated as 58.9. This result makes sense because, with exponential smoothing, the new forecast is influenced by both the most recent actual demand and the previous forecast, allowing it to adjust based on actual performance while still considering past predictions. This approach helps in adapting to changes in demand while smoothing short-term fluctuations.