Nemo Corp. is in the business of manufacturing cast and stamped steel products for the automotive industry. Steel ingots are purchased from the steel mills. For casted products, steel ingots have to be melted and cast. For stamped products, steel ingots have to be extruded into metal sheets and stamped. Nemo Corp. has no decision support tool in place to make the forecasting decisions for steel purchases. You are hired as a consultant to develop a decision support tool for them. Your first task is to choose a forecasting method for the company to determine the steel ingot purchases from the steel mills. The company has supplied you with the following quarterly demand data for the cast and stamped steel products in tons.
a) Plot the demand for the cast steel products and the stamped steel products separately (on a graph using excel) and comment on the trends you observe.
b) Forecast the total steel demand using the method of Moving averages where n is equal to 6 (Hint: when n=6, the first forecast should appear at the 7th data point, which is in Q3 of year 2). Compute MAD, MSE and MAPE.
c) Forecast the total steel demand using the Exponential Smoothing method where the smoothing constant is 0.15. (Hint: The first forecast should appear at the 2nd data point, which is in Q2 of year 1). Compute MAD, MSE and MAPE.