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The alpha factor (a fraction between 0 and 1) is used to determine how much of the previous smoothed estimate will be used and how much of the current seasonal adjusted demand is used to produce the new Smoothed Estimate (ED). Example: if the alpha factor is 0.8, then 20% of the previous period smoothed estimate is combined with 80% of the seasonal adjusted demand to give the new smoothed estimate. Compute the forecast statistic for first order smoothing using the alpha factor selected for the item, forecast alpha = (L - Low, M - Medium, H - High). Estimated Demand 1 = (1 - alpha factor) * old cur_est_dem_1 + SAD * alpha factor. So if the old estimated demand is 90 and the selected alpha factor is .5 then:
ED 1 = (1-.5)*90+(107.147*.5) = 98.5735
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