First-Order Exponential Smoothing
When you report to your supervisor that the moving average forecasting technique is not suitable for the product, he remembers that your colleague in charge of forecasting had been working on introducing the first-order exponential smoothing technique for this product. Therefore, your supervisor gives you the information in Figure 9.8.3.1, showing the demand for the product (January to October) and the forecast using the first-order exponential smoothing technique with $\alpha=0.3$ of the product (January to July).
$$
\begin{array}{|l|c|c|c|c|c|c|c|c|c|c|}
\hline & \text { Jan. } & \text { Feb. } & \text { Mar. } & \text { Apr. } & \text { May. } & \text { Jun. } & \text { July. } & \text { Aug. } & \text { Sept. } & \text { Oct. } \\
\hline \text { Demand } & 151 & 135 & 143 & 207 & 199 & 175 & 111 & 95 & 119 & 191 \\
\hline \text { Forecast } & 187 & 176 & 164 & 158 & 172 & 180 & 179 & & & \\
\hline
\end{array}
$$
To evaluate your supervisor's suggestion, you execute the following steps:
a. Compute the forecast for August, September, and October and for the following month, November.
b. Calculate the mean absolute deviation (MAD) for November assuming $\operatorname{MAD}(\operatorname{Jan})=18$ and the smoothing parameter $\alpha$.
c. In the preceding exercise, could you have obtained a result comparable to the one for the parameter $\alpha$ calculated above by changing $\mathrm{n}$, that is, the number of observed values?
d. Decide whether the chosen first-order exponential smoothing technique with parameter $\alpha$ calculated above is appropriate for this product.
e. What can you say in general about the choice of $\alpha$ depending on the product life cycle?