Simple Exponential Smoothing

It can be used in Logistics and Supply Chain as a forecast method.

In Simple exponential smoothing, the new forecast is the former forecast plus “a” times the former forecast error (errort = Dt-Ft)

This formula can be written as follows:

Ft = F_t-1 + a (D_t-1- D_t-1)

Where:

Ft = Forecast at time t.

Dt = Actual demand at time t.

F_t-1 = Forecast at time t-1 (previous period)

D_t-1 = Actual demand at time t-1

a = smoothing constant or adjustment factor between 0 and 1

If a ® 1, adjustment compared to last actual value is important.

If a ® 0, adjustment compared to last actual value is weak.

Simple exponential smoothing