Similar to Simple Moving Average is a Waited Moving Average.
Again, we're going to be finding the mean
or taking an average but this time we're going to be assigning weights.
For some reason this slide,
your slide should have the weights listed on it,
slide 25, but we're using
weights of
.5
.3
and .2
When we take a look at our weights,
you will find that they add up to 1.0.
What we are doing here
where a Simple Moving Average was
each actual demand
got
the same weight. In a three month it was one-third, one-third,
one-third
literally, that we took. So we added it all up divided by 3.
Here
I think
some information is more important.
And when you're using a Weighted Moving Average,
the most recent information always gets
the highest weight.
The information farthest into the past will get the lowest weight.
Again your weights all have to add up to 1.0.
So looking at this, again, I have my months 20, 21, 22,
23, 24, and 25.
I'm going to start with
the information
that is farthest away, starting with month 20.
With this the most recent information is going to get the highest weight,
the most recent information is going to be month 22.
So I'm going to multiply that information
times my .5
130 I'm going to take
the next
weight down, which is a .3,
and I'll multiply that by .3 and the information that is in
the most
the past
the furthest away from today,
I'm going to give a .2.
So I'm going to take
120 times .2
Again I'm taking these
and instead of giving them all the same weight, i'm going to multiply, literally,
it's going to be
120 times .2 plus 130 times .3 plus 110 times .5.
Now let's see if I can do this. I didn't do this part of the math in my head,
so let's see if we can do it quickly here.
.2 times 120 should be 24.
Plus .3 times 130 should be 39
And .5 times 110 should be 55.
And if I add all of these together, my weighted average
would be a 118.
What I want to do now is slide these values down
one time period
and work out the problem again.
So instead of using 20, 21, and 22
I'm now going to use 21, 22, and 23.
So it should be
130 times .2 plus
110 times .3
plus
140 times .5
and if I multiply those out and add them together, I should have 129.
I'm going to take them,
so we've got these three to begin with,
then we worked
on these three.
I'm now going to take
110, 140, and 110,
time periods 22, 23, and 24.
Time period 22, 110, I'm going to multiply by .2
The 140
in time period 23, I'm going to multiply
by .3
And the 110 in time period 24, I'm going to multiply
by .5
And after doing that, adding those all together,
you should end up with 119.
Again the same thing. Move those values down one
and as long as you still have, because we have three weights,
three time periods to work with here, time periods 23, 24, and 25,
I can take them and multiply
by the .2, .3., and .5
add them all together and you should get 126.
This right here
is the Weighted
Moving
Average.