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    Illustration of The Naïve Method

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    276Omprakash Chaudhary
    The document illustrates different forecasting methods including naive, mean (simple average), simple moving average, and weighted moving average. The naive method sets the forecast equal to the actual demand of the previous period. The mean method uses the average of all past demands. The simple moving average uses the average of a specified number of most recent periods. The weighted moving average weights more recent periods more than older periods. Examples are provided to demonstrate how each method would produce forecasts over a 7 year period.

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    Illustration of The Naïve Method

    Uploaded by

    276Omprakash Chaudhary
    67 views3 pages
    The document illustrates different forecasting methods including naive, mean (simple average), simple moving average, and weighted moving average. The naive method sets the forecast equal to the actual demand of the previous period. The mean method uses the average of all past demands. The simple moving average uses the average of a specified number of most recent periods. The weighted moving average weights more recent periods more than older periods. Examples are provided to demonstrate how each method would produce forecasts over a 7 year period.

    Original Description:

    Lecture 1

    Original Title

    L23

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    The document illustrates different forecasting methods including naive, mean (simple average), simple moving average, and weighted moving average. The naive method sets the forecast equal to the actual demand of the previous period. The mean method uses the average of all past demands. The simple moving average uses the average of a specified number of most recent periods. The weighted moving average weights more recent periods more than older periods. Examples are provided to demonstrate how each method would produce forecasts over a 7 year period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    67 views3 pages

    Illustration of The Naïve Method

    Uploaded by

    276Omprakash Chaudhary
    The document illustrates different forecasting methods including naive, mean (simple average), simple moving average, and weighted moving average. The naive method sets the forecast equal to the actual demand of the previous period. The mean method uses the average of all past demands. The simple moving average uses the average of a specified number of most recent periods. The weighted moving average weights more recent periods more than older periods. Examples are provided to demonstrate how each method would produce forecasts over a 7 year period.

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    of 3

    ILLUSTRATION OF THE NAÏVE METHOD

    Naïve method: The forecast for next period (period t+1) will be equal to this period's actual
    demand (At).

    In this illustration we assume that each year (beginning with year 2) we made a forecast, then
    waited to see what demand unfolded during the year. We then made a forecast for the subsequent
    year, and so on right through to the forecast for year 7.

    Actual
    Demand Forecast
    Year (At) (Ft) Notes
    There was no prior demand data on
    1 310 --
    which to base a forecast for period 1

    From this point forward, these forecasts


    2 365 310
    were made on a year-by-year basis.

    3 395 365

    4 415 395

    5 450 415

    6 465 450

    7 465

    MEAN (SIMPLE AVERAGE) METHOD

    Mean (simple average) method: The forecast for next period (period t+1) will be equal to the
    average of all past historical demands.

    In this illustration we assume that a simple average method is being used. We will also assume
    that, in the absence of data at startup, we made a guess for the year 1 forecast (300). At the end
    of year 1 we could start using this forecasting method. In this illustration we assume that each
    year (beginning with year 2) we made a forecast, then waited to see what demand unfolded
    during the year. We then made a forecast for the subsequent year, and so on right through to the
    forecast for year 7.
    Actual
    Demand Forecast
    Year (At) (Ft) Notes
    This forecast was a guess at the
    1 310 300
    beginning.
    From this point forward, these forecasts
    2 365 310.000 were made on a year-by-year basis
    using a simple average approach.
    3 395 337.500
    4 415 356.667
    5 450 371.250
    6 465 387.000
    7 400.000

    SIMPLE MOVING AVERAGE METHOD


    Simple moving average method: The forecast for next period (period t+1) will be equal to the
    average of a specified number of the most recent observations, with each observation receiving
    the same emphasis (weight).
    In this illustration we assume that a 2-year simple moving average is being used. We will also
    assume that, in the absence of data at startup, we made a guess for the year 1 forecast (300).
    Then, after year 1 elapsed, we made a forecast for year 2 using a naïve method (310). Beyond
    that point we had sufficient data to let our 2-year simple moving average forecasts unfold
    throughout the years.
    Actual
    Demand Forecast
    Year (At) (Ft) Notes
    This forecast was a guess at the
    1 310 300
    beginning.
    This forecast was made using a naïve
    2 365 310
    approach.
    From this point forward, these forecasts
    3 395 337.500 were made on a year-by-year basis
    using a 2-yr moving average approach.
    4 415 380.000
    5 450 405.000
    6 465 432.500
    7 457.500
    ANOTHER SIMPLE MOVING AVERAGE ILLUSTRATION
    In this illustration we assume that a 3-year simple moving average is being used. We will also
    assume that, in the absence of data at startup, we made a guess for the year 1 forecast (300).
    Then, after year 1 elapsed, we used a naïve method to make a forecast for year 2 (310) and year 3
    (365). Beyond that point we had sufficient data to let our 3-year simple moving average forecasts
    unfold throughout the years.
    Actual
    Demand Forecast
    Year (At) (Ft) Notes
    This forecast was a guess at the
    1 310 300
    beginning.
    This forecast was made using a naïve
    2 365 310
    approach.
    This forecast was made using a naïve
    3 395 365
    approach.
    From this point forward, these forecasts
    4 415 356.667 were made on a year-by-year basis
    using a 3-yr moving average approach.
    5 450 391.667
    6 465 420.000
    7 433.333
    WEIGHTED MOVING AVERAGE METHOD
    Weighted moving average method: The forecast for next period (period t+1) will be equal to a
    weighted average of a specified number of the most recent observations.
    In this illustration we assume that a 3-year weighted moving average is being used. We will also
    assume that, in the absence of data at startup, we made a guess for the year 1 forecast (300).
    Then, after year 1 elapsed, we used a naïve method to make a forecast for year 2 (310) and year 3
    (365). Beyond that point we had sufficient data to let our 3-year weighted moving average
    forecasts unfold throughout the years. The weights that were to be used are as follows: Most
    recent year, .5; year prior to that, .3; year prior to that, .2
    Actual
    Demand Forecast
    Year (At) (Ft) Notes
    This forecast was a guess at the
    1 310 300
    beginning.
    This forecast was made using a naïve
    2 365 310
    approach.
    This forecast was made using a naïve
    3 395 365
    approach.
    From this point forward, these forecasts
    4 415 369.000 were made on a year-by-year basis
    using a 3-yr wtd. moving avg. approach.
    5 450 399.000
    6 465 428.500
    7 450.500

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