CPIM Practice Exam

Which of the following increases the weight of the latest demand in an exponential smoothing forecast?

1. Decreasing the alpha smoothing constant.

2. Increasing the alpha smoothing constant.

3. Multiplying the previous forecast.

4. Adding seasonal adjustments.

The correct answer is: Increasing the alpha smoothing constant.

The choice that increases the weight of the latest demand in an exponential smoothing forecast is increasing the alpha smoothing constant. In exponential smoothing, the alpha (α) value, which ranges between 0 and 1, determines the weight given to the most recent observation relative to the previous forecast. A higher alpha value means that more weight is placed on the most recent data point, thereby making the forecast more responsive to recent changes in demand. This results in a forecast that is more sensitive to fluctuations by emphasizing the latest information more significantly. In contrast, decreasing the alpha smoothing constant would result in the model giving more weight to past observations, thereby making the forecast less responsive to recent changes. Other methods such as multiplying the previous forecast or adding seasonal adjustments do not directly increase the weight of the latest demand in the context of exponential smoothing; those actions involve different aspects of forecasting rather than adjusting the weight of the most recent demand.