Jim's Department at a Local Department Store Has Tracked the Sales

Short Answer

Jim's department at a local department store has tracked the sales of a product over the last ten weeks. Forecast demand using exponential smoothing with an alpha of 0.4, and an initial forecast of 28.0 for period 1. Calculate the MAD. What do you recommend?
$$\begin{array} { | c | c | } \hline \text { Period } & \text { Demand } \\\hline 1 & 24 \\\hline 2 & 23 \\\hline 3 & 26 \\\hline 4 & 36 \\\hline 5 & 26 \\\hline 6 & 30 \\\hline 7 & 32 \\\hline 8 & 26 \\\hline 9 & 25 \\\hline 10 & 28 \\\hline\end{array}$$
$\begin{array}{|c|c|l|l|l|l|}\hline\begin{array}{c}\text { Answer: } \\\text { Period }\end{array} & \text { Demand } & \text { Forecast } & \text { Error } & & \text { Absolute } \\\hline 1 & 24 & 28.00 & & & \\\hline 2 & 23 & 26.40 & -3.40 & & 3.40 \\\hline 3 & 26 & 25.04 & 0.96 & & 0.96 \\\hline 4 & 36 & 25.42 & 10.58 & & 10.58 \\\hline 5 & 26 & 29.65 & -3.65 & & 3.65 \\\hline 6 & 30 & 28.19 & 1.81 & & 1.81 \\\hline 7 & 32 & 28.92 & 3.08 & & 3.08 \\\hline 8 & 26 & 30.15 & -4.15 & & 4.15 \\\hline 9 & 25 & 28.49 & -3.49 & & 3.49 \\\hline 10 & 28 & 27.09 & 0.91 & & 0.91 \\\hline & & \text { Total } & 2.64 & & 32.03 \\\hline & & \text { Average } & 0.29 & & 3.56 \\\hline & & & \text { Bias } & & \text { MAD } \\\hline\end{array}$
The tracking signal RSFE/MAD = 2.64/3.56 = .742 is low; therefore, keep using the forecasting method.