Demand forecasting · simple exponential smoothing · Brown 1956

A SMOOTHER FORECAST IS A LATER ONE

St = αXt + (1 − α)St−1   ·   lag ≈ 1 − αα

Two years of weekly demand for one product family: a seasonal swell, plus the noise of real ordering. The navy line is the forecast a simple smoother produces — each week a weighted vote between what just sold and what it already believed, α = 0.30. The vote cuts the noise standard deviation from 350 to 147 units, and the bill arrives as delay: the forecast runs about 2.2 weeks behind the season, so its peaks land after the real ones. Those weeks are product you did not make and stock you held instead. You cannot buy a calm forecast without paying for it in lateness.