trend model initialization

[Former Member]

Anyone knows how the Holt's method (Trend model) is Initialized? I can't figure out how the APO calculate the very first value for "Trend" and "Basic Value"

Thanks in advance.

[Former Member]

Hi,

Check SAP help:

http://help.sap.com/saphelp_scm50/helpdata/en/8f/9d6937089c2556e10000009b38f889/frameset.htm

Definition/Redefinition of Forecast Models

> Creating a Master Forecast Profile

> Univariate Forecasting

> Forecast Strategies

> Model initialisation

Basically

Trend = (Hist(3) - Hist (1) )/2

Basic= (Hist(3) +Hist(2) +Hist (1) )/3 + trend

Hope it works!

Thanks and Regards

Julien

[Former Member]

Thanks Julien.

I spent sometime on it and find the formula on the help page is not correct.

For the initialzation process of the trend model, APO use the very first three number to calcuate intial value of trend and basic value. These two number are hidden. Then it calcuates the trend/basic value for t=4, which is the very first two value on the screen.

Trend(Initial) = slope( {sales(t), sales(t1), sales(t2)}, {1,2,3})

Intercept(Initial) = intercept( {sales(t), sales(t1), sales(t2)}, {1,2,3})

Basic value(Initial) = 3*Trend(Initial) + Intercept (Initial)

• Trend and intercept values are calcuated using least square error method (linear regression).

• {sales(t), sales(t1), sales(t2)} are Y axis values

• {1,2,3} are X axis values

Trend(t4) = beta*(basic value-basic value(Initial))(1-beta)(Trend(Initial))

basic value(t4) =alpha*sales(t4)(1-alpha)*(basic(initial)trend(initial))

It is a little complicated. But it is tested and match up with APO very well.