What is the exponential smoothing forecast for July if the alpha is 0.2?

An organization has a forecast for June of 125 units. However, 140 units actually sell.

What is the exponential smoothing forecast for July if the alpha is 0.2?
A . 137 units
B . 130 units
C . 53 units
D . 128 units

View Answer

Answer: B

Explanation:

Using the exponential smoothing formula, Ft=Ft−1+α(At−1−Ft−1)F_t = F_{t-1} + alpha (A_{t-1} – F_{t-1})Ft=Ft−1+α(At−1−Ft−1), where FtF_tFt is the forecast, αalphaα is the smoothing constant (0.2), At−1A_{t-1}At−1 is actual demand (140), and Ft−1F_{t-1}Ft−1 is the previous forecast (125). Calculation: 125+0.2×(140−125)=128+2=130125 + 0.2 times (140 – 125) = 128 + 2 = 130125+0.2×(140−125)=128+2=130.

Reference: Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.