#2: Operations Management Planning (15% of Final Grade) Background information Simple Moving Average (MA) The simple moving average concept is based on the idea of averaging random fluctuations in a time series to identify the underlying direction in which the time series is changing. A moving average forecast is an average of the most recent observations in a time series. Step 1 Determine the model's time frame (e.g., 3 periods, 5 periods etc.). In this example we will use a 3 period moving average. Step 2 Add the first 3 observations together and divide by 3. The answer is the forecast for the fourth period. Step 3 To progress further, add the observation numbers 2, 3 and 4 together and divide by 3. The answer is the forecast for the fifth period. Repeat steps 1 through 3 as necessary