M&IS 34060—Operations...
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M&IS 34060—Operations Management Excel Exercises—Forecasting Introduction The data used in these exercises are chosen to be “basic” as far as forecasting is concerned. What you will note, though, is that the mechanics of implementing forecasting via spreadsheets is emphasized. How long will these take? A spreadsheet and forecasting beginner might require 1 ½ hours or more to complete, while an accomplished individual could be finished in about 20 – 30 minutes. Keep in mind the following issues in your spreadsheet design and use… a) When graphing, you should be able to “copy and paste” or “drag and drop” a new series for plotting and not have to recreate the graph. b) For best design, enter all formulas once and copy them. This avoids mistakes. c) When setting up weighted moving average, WMA, or exponential smoothing, ES …can you make it so that the weights are only entered in one location? Excel Exercises For these exercises, you are to create your own spreadsheets. Save your work at each step as it may be needed to complete later questions. Use a system like forecast-1a, forecast-1b, etc. We will use problems 4.2 and 4.3 in the textbook, depending on edition, as an example. See below. 1) Can you create your own spreadsheet to complete the questions in the order I give next? a) Plot the data on a graph. Do you observe any trend, cycles, or random variations? Save your file. b) Make forecasts using a three period moving average, MA(3), and plot on the same graph. Save your file but use a different name. c) Forecast using a three period weighted moving average, WMA(3), and plot on the graph. Use weights of 0.1, 0.3, and 0.6 where the most recent data is weighed most heavily. Plot on the graph and be sure to save your work. d) Use the exponential smoothing, ES, forecast method, with an alpha ( of 0.4 then plot on the graph. Use a “reasonable guess” for the initial forecast. What constitutes “reasonable”? Save your work. e) Which forecast method appears to be best? Worst? How do you know?
Transcript of M&IS 34060—Operations...
M&IS 34060—Operations Management Excel Exercises—Forecasting
Introduction The data used in these exercises are chosen to be “basic” as far as forecasting is concerned. What you will note, though, is that the mechanics of implementing forecasting via spreadsheets is emphasized. How long will these take? A spreadsheet and forecasting beginner might require 1 ½ hours or more to complete, while an accomplished individual could be finished in about 20 – 30 minutes. Keep in mind the following issues in your spreadsheet design and use…
a) When graphing, you should be able to “copy and paste” or “drag and drop” a new series for plotting and not have to recreate the graph.
b) For best design, enter all formulas once and copy them. This avoids mistakes. c) When setting up weighted moving average, WMA, or exponential smoothing, ES …can you
make it so that the weights are only entered in one location? Excel Exercises For these exercises, you are to create your own spreadsheets. Save your work at each step as it may be
needed to complete later questions. Use a system like forecast-1a, forecast-1b, etc. We will use problems
4.2 and 4.3 in the textbook, depending on edition, as an example. See below.
1) Can you create your own spreadsheet to complete the questions in the order I give next?
a) Plot the data on a graph. Do you observe any trend, cycles, or random variations? Save your file.
b) Make forecasts using a three period moving average, MA(3), and plot on the same graph. Save your file but use a different name.
c) Forecast using a three period weighted moving average, WMA(3), and plot on the graph. Use weights of 0.1, 0.3, and 0.6 where the most recent data is weighed most heavily. Plot on the graph and be sure to save your work.
d) Use the exponential smoothing, ES, forecast method, with an alpha ( of 0.4 then plot on the graph. Use a “reasonable guess” for the initial forecast. What constitutes “reasonable”? Save your work.
e) Which forecast method appears to be best? Worst? How do you know?
2) Calculate error measures (Bias, MAD, MSE) for each of the forecasts above. Using thisinformation, decide which forecasting method you believe is best. How did you decide? Save yourwork.Note—As you will see, I will reuse the spreadsheet files created above in this step and will in fact modify them
before I start. Recall in step (1), we put all our forecasting methods on one sheet. I will edit these files so each
sheet contains only one forecast method and then I will calculate the Bias, MAD, and MSE error measures for
each. I will also delete the graph to simplify the sheet.
ALL STUDENTS, INCLUDING ONLINE STUDENTS, ARE EXPECTED TO KNOW HOW TO USE THE SOLVER. Online students with Macs, you must use Office 2016 to have this functionality. Office 2011 does not.
3) For this Excel Exercise, you will learn how to use the SOLVER to find the optimum alpha () thatminimizes error for your exponential smoothing forecasts. Therefore, before completing the stepsbelow, you must have the bias, MAD, and MSE completed from above. Once that is complete, followthese steps.
a) On the DATA menu tab, look for a choice called “SOLVER”.NOTE…If the solver is not found…
Go to the OFFICE BUTTON and choose Excel Options. Choose ADD-INS, and then click the GO button. Put a checkmark by Solver add-in and click OK.
b) Enter the Solver Parameters into the dialog box as shown.
Explanation…The TARGET CELL is an error measure such as MAD or MSE, which we want to make equal to the MIN. The CHANGING CELL is a reference to alpha (), which is SUBJECT TO THE CONSTRAINTS where >= 0 and <=1.
NOTE—your actual target and changing cell references may be different than the F22 and B5
shown above.
c) Click the SOLVE button then review results. What is the optimum What is the minimum errormeasure achieved? How do the results change if MSE is used instead of MAD and vice versa?
ALL STUDENTS, INCLUDING ONLINE STUDENTS, ARE EXPECTED TO KNOW HOW TO PERFORM REGRESSION USING EXCEL.
Online students with Macs, you must use Office 2016 to have this functionality. Office 2011 does not.
(4) Try solving problem 4.32 in the textbook. This is a linear regression forecasting problem, with the related information copied below. Linear regression in Excel can be found on the DATA menu tab, look for a choice called “DATA ANALYSIS”.
NOTE…If this choice is not present, repeat the instructions for SOLVER above but this time put a check
mark next to the ANALYSIS TOOLPAK box. The Data Analysis choice will now be on the DATA menu tab.
Perform a linear regression to forecast bar sales to the number of guests for the B&B information below. If 20 guests are expected next week, what are the sales expected to be?
NOTE…Understanding the regression output in Excel is important here. Once you do, you must figure out
how to use the output. I suggest that you first write down the regression equation by hand, then figure out
how to use this formula to forecast within Excel using references, etc.
WEEK GUESTS BAR SALES 1 16 $ 330 2 12 270 3 18 380 4 14 300
(5) The number of transistors made at a plant in Korea the past five months follows:
Month Transistors (millions) 1-Jan 140 2-Feb 160 3-Mar 190 4-Apr 200 5-May 210
a) Using Excel, formulate a trend analysis model to forecast the number of transistors in June andJuly. How is this done? Think regression…Hooray, joy joy!
b) Consider this change: If instead of months the data were really for the years 2001, 2002, 2003,2004, and 2005…
a. How does this change the structure of your model?
b. Do the forecasts change for 2006 and 2007 change?
c. What does change in the model if you use a year index such as 2001 instead of a monthindex of 1, 2002 instead of 2, etc.? Hint: Look at the coefficients in the resulting
regression. Do the forecasts themselves change? Does this make sense? Why?
(6) This exercise requires you to complete a multiple regression analysis on a dataset that is found at the link below. You are to predict college GPA after 3 semesters using information on 224 students. The prediction variables include: high school math (HSM) grades, high school science (HSS) grades, high school English (HSE) grades and SAT scores on math (SATM) and verbal (SATV).
Note—for students taking this course in-class, we will step through this problem together to make sure
everyone can get through the analysis. On-line students can watch the video presentation concurrent to
completing it rather than after you complete it. (Normally you do try these exercises first and then watch
the video to confirm your work, right? Good, that’s what I thought.)
The data is found at the following link… http://www.personal.kent.edu/~vberardi/34060/forecasting1.xlsx THERE ARE SOME ADDITIONAL PROBLEMS ON THE NEXT PAGE FOR THOSE WHO DESIRE
MORE PRACTICE.
vberardi
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Problem 6 is adapted from The Practice of Business Statistics: Using Data for Decisions (2003) by Moore, McCabe, Duckworth, and Sclove
vberardi
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THE PROBLEMS THAT FOLLOW ARE REGRESSION FORECASTING AND WILL BE
LOOKED AT, TIME AVAILABLE
Solution Video Links There are two solution video formats below. The streaming version is interactive and you should try
these first for the best experience. If the streaming version does not work for you, use the MP4 version
instead.
Streaming Version EE Forecasting Part 1
EE Forecasting Part 2-First Half
EE Forecasting Part 2-Second Half
EE Forecasting Part 3
EE Forecasting Part 4
EE Forecasting Part 5
EE Forecasting Part 6
MP4 Version EE Forecasting Part 1
EE Forecasting Part 2-First Half
EE Forecasting Part 2-Second Half
EE Forecasting Part 3
EE Forecasting Part 4
EE Forecasting Part 5
EE Forecasting Part 6
