Simple exponential smoothing is being used to forecast demand. The previous forecast of 66 turned out to be four units less than actual demand. The next forecast is 66.6, implying a smoothing constant, alpha, equal to ? The answer is alpa 15, but how did you get the answer?

15

Explanation:

Using the Exponential smoothing model below:-

Ft= Ft-1 + α (At-1 – Ft-1)

Where,

Ft= new forecast

Ft-1= previous period forecast

At-1= previous period actual demand

α =?     Ft-1=66    At-1=70        Ft= 66.6

Ft = 66 + α (70-66)

   66.6 = 66+ 4* α

   (66.6-66)= 4* α

   α = 0.6/4

     α = 0.15

Thus, alpha value will be 0.15 for simple exponential smoothing.

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explanation:

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