Moving Average

Forecast calculation with formula Moving Average projects the values in the forecast period based upon the average demand (sales) over a specific number of preceding periods, that is, weeks or months. The number of preceding periods used in the forecast calculation is referred to as n. The number of periods used determines how quickly the forecast will react to changes in actual trends and how sensitive it is to random variations. The more periods included will result more stable method for random variations but will also react slowly to real trends. Moving Average is calculated based on:

In M3 BE, a various number of hybrids of Moving Average exist. In M3 DMP, one formula replaces these due to a more dynamic and flexible set up feature. This is solved by introducing the concept Offset periods and Offset years. You can determine the first historical period to use in the forecast calculation when calculating the Moving Average based upon n number of calculation periods. For example, if you calculate the next period forecast as the average actual demand of the preceding, same, and following period from the preceding year, the Offset period is set to 11 and Number of calculation periods to 3. The use of Offset period in combination with various values of n provides endless possibilities to calculate the moving average.