Example 4.5
The exponential smoothing technique is demonstrated in Table 4-7 Figure 4-7 for Acme Tool Company for the years 2000 to 2006, using smoothing constants of .1 and .6. The data for the first quarter of 2006 will be used as test data to help determine the best value of α (among the two considered). The exponentially smoothed series is computed by initially setting Ÿ1 equal to 5oo .If earlier data are available, it might be possible to use them to develop a smoothed series up to 2000 and then use this experience as the initial value for the smoothed series. The computaions leading to the forecast for periode 3 and 4 are demonstrated next