John Ballantyne Manufacturing Services www.jbms.net.

au

MOVING AVERAGES
Moving Averages
Sales 3-month 5-month 7-month
Jan 92
Feb 83 Copy these formulae
Mar 66 down to "Jan"
Apr 74 80
May 75
Jun 84 78
Jul 84
Aug 81 80
Sep 75
Oct 63
Nov 91
Dec 84
Jan

Moving Averages
100
90
80
70
60
50 Sales
Qty

40 3-month
30 5-month
20 7-month
10
0
Jan
Feb

Jun

Aug
Sep

Jan
Jul
Mar
Apr

Oct

Dec
Nov
May
John Ballantyne Manufacturing Services www.jbms.net.au

EXPONENTIAL SMOOTHING Enter the number

Number of Months in average: 3 of months in Different Sales Pattern
moving average
Smoothing Factor: 0.5
Sales Forecast
Jan 92 92 Jan 90
Feb 83 92 Feb 100
Mar 66 Copy this formula Mar 300
down to "Jan"
Apr 74 Apr 500
May 75 May 700 Copy these sales
Jun 84 Jun 1200 to Col "C" to see
Jul 84 Jul 1500 different effect
Aug 81 Aug 1000
Sep 75 Sep 700
Oct 63 Oct 400
Nov 91 Nov 200
Dec 84 Dec 100
Jan Jan

100 Exponential Smoothing

90
Some cells are protected without password.
80
To "Unprotect" select "Tools", "Protection"
70
60
50
40
30
20 Sales
10 Forecast
0
Jun
Jan

Aug

Sep

Jan
Mar

Apr
Feb

Jul
May

Oct

Nov

Dec
John Ballantyne Manufacturing Services www.jbms.net.au

period>> 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 100 100 100 100 100 100 100 100 100 100 100 100 100 Experiment with forecasts and
Actual Sales 90 110 90 100 110 95 105 90 110 95 110 95 actual sales to see the effect on
MAPE. "Tracking Signal" and
Error -10 10 -10 0 10 -5 5 -10 10 -5 10 -5 theoretical Safety Stock
"Cumulative Error" -10 0 -10 -10 0 -5 0 -10 0 -5 5 0
Absolute Error 10 10 10 0 10 5 5 10 10 5 10 5 A Tracking Signal greater than
Absolute Percentage Error 10% 10% 10% 0% 10% 5% 5% 10% 10% 5% 10% 5% (say) 4.5 shows an out-of-
Mean Absolute Deviation (error) 8 ("MAD") control forecast…...
Tracking Signal: 0.0
"MAPE" 8% (Mean Absolute Percentage Error)

No. of Standard Deviations: 2 (1=84%Cust Serv, 2=97%, 3=99.97%)

Theoretical Safety Stock: 19
Theoretical Safety Stock as Percent of Forecast: 19%
….Safety Stock cannot be set
Forecast v Sales History for an out-of-control forecast.
120
100
Change the number of Std.
80 Deviations (customer service
60 levels) and note the effect on
Qty

safety stock.
40 Forecast
20 Actual Sales

0
Try these
1 2 3 4 5 6 7
Month 8 9 10 11 12

Various "Actual Sales"…..

In control-high MAPE 50 180 150 25 90 150 190 10 120 120 200 20
In control - low MAPE 90 110 90 100 110 95 105 90 110 95 110 95
Badly Biased 50 100 110 25 70 80 100 10 100 90 110 20
A "Salesman's Forecast" 110 120 105 110 100 120 130 110 120 105 100 120

An example of how sales staff under-state the true potential

sales in order to ensure their bonus.
John Ballantyne Manufacturing Services www.jbms.net.au

From Student Guide

SALES SALES
year Last New
before Year AVE INDEX Forecast
Jan 10 12 11 0.05 0
Feb 10 12 11 0.05 0
Mar 10 12 11 0.05 0
Apr 50 55 53 0.26 0
May 150 160 155 0.76 0
Jun 400 420 410 2.00 0
Jul 600 620 610 2.98 0
Aug 700 730 715 3.49 0 Enter new average for next
Sep 350 360 355 1.74 0 year's forecast
Oct 100 105 103 0.50 0
Nov 10 12 11 0.05 0
Dec 10 12 11 0.05 0
Average Sales: 2400 2510 205 12 New Average> 0

Seasonal Indexed Forecast

800
SALES Last
700
Year
600 Linear (SALES
500 Last Year)
New Forecast
400
300
200
100
0
1 2 3 4 5 6 7 8 9 10 11 12