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SPC - Part A - Case Discussion

The document discusses forecasting methods for Specialty Packaging Corporation, focusing on static forecasting and Winter's model. It details the steps for deseasonalizing demand, running regressions, and calculating seasonal factors for both black and clear plastic. The results indicate that the optimal smoothing constants for both methods yield similar solutions for the forecasting of demand.

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SARA CRUZ
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242 views4 pages

SPC - Part A - Case Discussion

The document discusses forecasting methods for Specialty Packaging Corporation, focusing on static forecasting and Winter's model. It details the steps for deseasonalizing demand, running regressions, and calculating seasonal factors for both black and clear plastic. The results indicate that the optimal smoothing constants for both methods yield similar solutions for the forecasting of demand.

Uploaded by

SARA CRUZ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 7—Specialty Packaging Corporation, Part A

The results for this case are obtained using the accompanying spreadsheet Chapter 7—SPC case study
answer. Given the clear seasonal pattern in the data, the forecast is made using the static forecasting
method (with trend and seasonality) and Winter’s model (both outlined in Chapter 7).

Static Forecasting Method

The result for the static forecasting method is contained in the worksheet Static Forecast. For black
plastic, the first step is to obtain deseasonalized demand using Equation 7.2. This is obtained in Cells
D31:D46. The next step is to run a regression between deseasonalized demands and period value
(contained in Cell B31:46). The results of the regression are contained in Cells R28:Z47. The
deseasonalized demand in period 0 is given by the Intercept in Cell S46. The trend is given by the value
in Cell S47. These two values are used to obtain the deseasonalized demand values in Cells E29:E48
based on the regression. The ratio of the actual demand in Cells C29:48 and the deseasonalized demand
in Cells E29:E48 is used to estimate the seasonal factors in Cells F29:F48. The seasonal factors are then
averaged in Cells S53:S56. The average seasonal factors are then used to evaluate the forecasts in Cells
G29:G60 using Equation 7.1. The results are as follows:

Copyright © 2019 Pearson Education, Inc.


The various error estimates are shown in Cells I29:P48.

Copyright © 2019 Pearson Education, Inc.


For clear plastic, the methodology used is identical except that the results are shown in Cells A64:Z96.
The static forecast for clear plastic is as follows:

Copyright © 2019 Pearson Education, Inc.


Winter’s Model

The evaluations for Winter’s model are shown in worksheet Winter. The first step in Winter’s model is to
obtain initial estimates of level, trend, and seasonal factors. This is done exactly as in the Static Forecast
method, except that the Intercept in Cell S46 (for Clear Plastic) becomes the level in period 0 (Cell D29),
Cell S47 becomes the trend in period 0 (Cell E29) with initial seasonal factors being estimated in Cells
S53:S56 exactly as for the Static Model. The level, trend, and seasonal factors are then updated using
Equations 7.18–7.20 with values of α, β, and γ as shown in Cells K20:22. In the spreadsheet, the values
of α, β, and γ are chosen using Excel to minimize MAPE (in Cell O49). These may also be chosen to
minimize MAD (Cell M49) or MSE (Cell L49).

For black plastic, the optimal values of the smoothing constants (to minimize MAPE) turn out to be α = 0,
β = 0.04, γ = 0. The solution turns out to be pretty much the same as for the static case.

For clear plastic, the optimal values of the smoothing constants (to minimize MAPE) turn out to be α = 0,
β = 0, γ = 0. The solution turns out to be the same as for the static case.

Copyright © 2019 Pearson Education, Inc.

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