Operations and Supply Chain Management The Core

FORECASTING chapter 3 63
Example 3.4: Computing Trend and Seasonal Indexes from a Linear Regression
Line Obtained with Excel
Forecast the demand for each quarter of the next year using trend and seasonal indexes. Demand for
the past two years is in the following table:
QUARTER AMOUNT QUARTER AMOUNT
1 300 5 520
2 200 6 420
3 220 7 400
4 530 8 700
SOLUTION
First, we plot as in Exhibit 3.10 and then calculate the slope and intercept using Excel. For Excel,
the quarters are numbered 1 through 8. The “known y’s” are the amounts (300, 200, 220, etc.), and
Computing a Seasonal Factor from the Actual Data and Trend Line
exhibit 3.10
700
600
Excel:
Forecasting
500
400
300
200
100
I II III IV I II III IV
2 years ago Last year
QUARTER
2 years ago
ACTUAL
AMOUNT
FROM TREND
EQUATION
FIT t = 176.1 + 52.3t
RATIO OF
ACTUAL ÷ TREND
I 300 228.3 1.31
II 200 280.6 0.71
SEASONAL INDEX
(AVERAGE OF SAME
QUARTERS IN BOTH YEARS)
III 220 332.9 0.66 I 1.25
IV 530 385.1 1.38 II 0.79
Last year — — III 0.70
I 520 437.4 1.19 IV 1.28
II 420 489.6 0.86
III 400 541.9 0.74
IV 700 594.2 1.18