Question

Question:

Quarterly demand for flowers at a wholesaler is shown. Forecast quarterly demand for year 3 using simple exponential smoothing with α=0.1 as well as Holt’s model (double exponential smoothing) with α=0.1 and β=0.1. Which of the two methods do you prefer? Why? NOTE: for the simple exponential smoothing use 100 as the forecast for period 0.

			Forecast		Error
Year	Quarter	Demand	Exponential	Double Exponential	Exponential error	Double Exponential error
1	I	98
	II	106
	III	109
	IV	133
2	I	134
	II	140
	III	144

Answer 1

		Forecast	Error
Year	Quarter	Demand	Exponential	Double	Exponential error	Double Exponential error
Exponential
1	I	98	98	98	0	0
	II	106	98	98	8	8
	III	109	98.8	98.8	10.2	10.2
	IV	133	99.82	99.82	33.18	33.18
2	I	134	103.14	103.14	30.86	30.86
	II	140	106.22	106.22	33.78	33.78
	III	144	109.60	109.60	34.40	34.40

MSE for simple exponential smoothing with α=0.1 = 649.35

MSE for double exponential smoothing with α=0.1 and β=0.1 = 649.35

Since MSE for both models is the same, we can use any model of our choice.