Every time the signal trips, forecasting method is adjusted. Usually, the limit of the TS is taken to vary between 3 and 8. Let us now illustrate TS with an example of actual demand data, forecasted demand data and the resultant value of TS. Let us assume that up to period 5, we have made an initial estimate of the MAD to test accuracy of our forecasting model. For each subsequent period, we have computed TS value to understand, however, whether it is within the accepted range of 3 to 8.

In this case, the TS is less than the limit of 3 to 8 and is up to period 9. In periods 10 and 11, it undershoots the limit. As of now, the forecasting model is considered to be functioning well. However, if the trend persists even in subsequent periods, the forecasting model may have to be reassessed. Using a tracking control chart, we can plot the data to explain the situation.

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Period

Actual Demand (At)

Forecasted Demand (Ft)

Errors (At-Ft)

Sum of errors

TS

1.

125

132

-7

2.

144

139

+5

3.

133

136

-3

4.

130

134

-4

5.

137

136

+ 1

4.00

6.

143

141

+2

+2

3.67

+0.54

7.

137

140

-3

-1

3.57

-0.28

8.

138

141

-3

-4

3.50

-1.14

9.

133

139

-6

-10

3.78

-2.65

10.

131

136

-5

-15

4.30

-3.49

II.

130

134

-4

-19

3.91

-4.86 