Journal of Computations & Modelling

Improving Forecasting Accuracy by the Utilization of Genetic Algorithm –An Application to the Data of Frozen Cakes

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• Abstract

  In industries, making a correct forecasting is inevitable. In this paper, a hybrid method is introduced and plural methods are compared. Focusing that the equation of exponential smoothing method(ESM) is equivalent to (1,1) order ARMA model equation, new method of estimation of smoothing constant in exponential smoothing method is proposed before by us which satisfies minimum variance of forecasting error. Generally, smoothing constant is selected arbitrarily. But in this paper, we utilize above stated theoretical solution. Firstly, we make estimation of ARMA model parameter and then estimate smoothing constants. Furthermore, combining the trend removing method with this method, we aim to improve forecasting accuracy. An approach to this method is executed in the following method. Trend removing by the combination of linear and 2nd order non-linear function and 3rd order non-linear function is executed to the original production data of two kinds of cakes. Genetic Algorithm is utilized to search optimal weights for the weighting parameters of linear and non-linear function. For the comparison, monthly trend is removed after that. Then forecasting is executed on these data. In particular, a new method for calculating forecasting error is also proposed.