Case HL: Holt’s Linear Trend Algorithm
Venessa’s analytical talent from her statistical training is beginning to be
recognized among the corporate executives. One of her recent accomplishments
is the development of a forecast system for the gross sales of the company, the
work that is highly appreciated by Naomi King, the Controller. Unlike the
movements of products to major customers, the sales data show a strong trend.
Simple exponential smoothing forecasts may lag the actual sales figures. She
remembers from her forecasting class that the Holt’s method provides not only
the estimate of the mean but also that of the slope at each time. The worksheet
given below shows her work of fitting the Holt’s method for the company sales
data. Study the algorithm used for smoothing.
Timeplot
2500000
2000000
1500000
1000000
500000
78
71
64
57
50
43
36
29
22
15
8
1
0