As demand increased the company switched to manufacturing standard electronic components based on manufacturers who were mass producing electrical equipment. Pones was no longer relying on orders to initiate the manufacturing process but instead producing large volumes as they had established a reputation and were confident that for each period there would be sustained demand. As production quantities grew Pones Suppliers realised that inventory management was beginning to become a significant issue as costs of storage, obsolescence and other inventory holding costs began to mount. These problems were exacerbated by other instances where they were out of stock of critical supplies and these instances threatened the reputation and brand name of the company.
To cope with these issues the company decided to incorporate principles of demand forecasting to guide production planning with the expectation that this would lead to more efficient procurement of raw materials and scheduling of production staff. The data below provided below relates to actual sales over several periods:

Time Period       Components Sold
Period 1                         600
Period 2                         720
Period 3                         950
Period 4                        1100
Period 5                           850
Period 6                         1200

Required:

Describe THREE (3) components of a demand forecast. Ensure your description explains how each element may impact the outcome of the demand forecast. (6 marks)

 Given that the forecast for period 1 was 400 units, use exponential smoothing to forecast demand for the data relating to Pones Ltd for periods 2 to 6 based on an exponential smoothing constant of 0.80. (5 marks)

Use the MAD to calculate the relative accuracy of the demand forecast. (3 marks)