The manager of a small health clinic would like to use exponential smoothing to

Question

The manager of a small health clinic would like to use exponential smoothing to forecast demand for laboratory services in her facility. However, she is not sure whether to use a high or low value of ?. To make her decision, she would like to compare the forecast accuracy of a high and low ? on historical data. She has decided to use an ? = .7 for the high value and ? = .1 for the low value. Given the following historical data, which do you think would be better to use?

Demand

Week (lab requirements)                   

1   330

2   350                                

3   320

4   370                                

5   368

6 343

Explanation / Answer

Answer:

Alpha value should be used as 0.7.

Reason: The forecasted demand for the labor is fluctuating i.e. it is increasing or decreasing but does not show a fix pattern.So for such type of forecasting result, the alpha value should be higher so that the forecasting can be carried out in the fluctuating mode.

If we use alpha = 0.1, then the forecasting value will not have much fluctuations and it will be in a similar pattern and the values will not have much differences.  

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