BUSINESS FORECASTING

Coursework Assignment
Question 1

(a) The attached data shows monthly warehouse store sales (in million dollars) in the USA from Jan. 1992 to Jun. 2004, inclusive. Obtain a time plot of the data.
(b) Choose, giving your reasons, which exponential smoothing method is likely to be the most suitable for producing forecasts with this data set. Using the mean absolute percentage error (MAPE) as the measure of accuracy, obtain, by trial and error, optimum smoothing constants (up to two decimal places) for this set of data.
(c) Use your chosen exponential smoothing method and optimal smoothing constants to produce forecasts for each of the months from Jul. 2004 to Feb. 2005, inclusive.
(d) Suppose you are in the management services branch of a USA warehouse superstore and that you have just developed the method in part (b), and produced the forecasts in part (c).The actual warehouse store sales (in million dollars) for the periods forecasted in part(c) was as follows;

Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05
20549 20477 19108 21013 22486 28274 19813 19691

Write a short report to your head of branch, commenting on the exercise. You should include reference to the accuracy of the forecasts, and the likely accuracy of the method for producing forecasts up to 8 months ahead on a regular basis; potential problems/advantages of the method for producing such forecasts, and how the forecasts might be integrated into the planning operations of your firm.
(up to about 2 pages in 12 point font, single spaced or equivalent, for Q1(d) )

Question 2
Briefly describe some of the decision-making areas within firms or organisations where forecasts of various types have made a useful contribution. Select two of these areas and expand on the forecasting operation within these areas. (up to about 3 pages max for Q2.)

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