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1. Forecasting with seasonality: theoretical and practical aspects
TOPIC V. FORECASTING WITH SEASONALITY
Seasonality is any cyclical or periodic fluctuation in a time-series that repeats itself at the same phase of the cycle or period.
Seasonal variation is a component of a time series which is defined as the repetitive and predictable movement around the trend line in one year or less.
Seasonal variation is detected by measuring the quantity of interest for small time intervals, such as days, weeks, months or quarters.
Seasonality
Seasonal demand has a pattern that repeats. Demand for clothing has a seasonal pattern that repeats every 12 months. Some companies may analyze annual seasonal patterns quarterly, monthly or weekly.
Demand with an annual seasonal pattern has a cycle that is 12 periods long, if the periods are months, or 4 periods long if the periods are quarters.
Seasonality example
is an average that can be used to compare an actual observation relative to what it would be if there was no seasonal variation.
Seasonal index measures how much the actual data for a particular period tends to be above (or below) the average value.
Seasonal index
• The first way includes 3 steps:
Seasonal index and then the forecast with seasonality can be defined in two ways.
Seasonality: theoretical aspect
Seasonality: theoretical aspect
For example: a company must develop forecasts for the next year. It has collected statistical data on ice cream sales for 12 months. Calculate the seasonal index for each month for the next year and forecast of ice
cream sales for each month for the next year, if the company has annual forecast of ice cream for next year to be 1092 thousand dollars.
Calculation results
Calculation results
The second way which can be used to determine the seasonal index and then the forecast with
seasonality includes 4 steps:
Seasonality: theoretical aspect
Seasonality: theoretical aspect
Seasonality: theoretical aspect
Example 2: a company must develop forecasts for the next year’s quarterly retail sales. It has collected quarterly retail sales for the past three years (table 4). It has also forecast total retail sales for
next year to be 382 thousand dollars. What is the retail sales forecast for each quarter of 2015?
Calculation results
Calculation results
Calculation results
Forecasting with seasonality
