a. Prepare a forecast of call volume for July 2015 by applying Exponential Smoothing (with alpha = 0.5) to the prior 18 months of data. Use the appropriate Excel template from the Hillier text to prepare your forecast and assume that initial call volume is 24,000. Show your forecast below and attach the completed template.

Call Volume Forecast for July 2015 (Exponential Smoothing, alpha=0.5)

b. Apply Linear Regression to predict call volume from head count using the appropriate Excel template. Show your forecast below and attach the completed Excel template. Call Volume Forecast for July 2015 (Causal Forecasting based on head count)

c. Calculate the Mean absolute deviation value of the Exponential Smoothing model (a) and the Average Estimation Error of the Linear Regression model (b). Explain the difference between these two values. Mean absolute deviation of Exponential Smoothing model, alpha = 0.5:

Average Estimation Error for Causal Forecasting model based on headcount:

Explanation of the difference in values:

d. Considering your answers to a, b and c and all the factors that have been described above, prepare your best forecast for July 2015. Show your forecast value below and explain and justify how you came up with this forecast.

After many months of work and with Harry’s help, Mark has been able to stabilize the call center operation. Mark now has a better handle on how to forecast the daily call demand and he is able to prepare effective weekly staffing schedules for handling the daily variation in volume.

However, Mark is still experiencing difficulty in forecasting the volume from month to month. Cutting Edge has been very active in acquiring new companies while, at the same time, selling off portions of their existing business. Mark believes that this activity is causing fluctuations in call volume because it is affecting the employee head count of Cutting Edge.

Mark has assembled monthly data for call volume and head count for the past 18 months (refer to Cutting Edge Student File No. 2). Mark also suspects that there are other factors which may be affecting the call volume, and he has noted these factors on the attached spreadsheet. Based on the upcoming acquisition of Cutter Corp on 7/1/2015, the forecast of head count for July 2015 is 77,000.