OM for the fortunate amongst you is Operations Management, one of the more obscure and confusing sciences you come across in your journey that is an MBA. It was customary for our professor to give us in class assignments and quizzes, yet this one tops them all.
“Some analysts claim that forecasting using exponential smoothing is synanomous with driving while looking at the rear-view mirror. Under what conditions does this analogy hold?”
If your initial reaction was WTF, then welcome to the club. We had 10 minutes to come up with an answer to THAT. Any ideas??!! Would love to get your input prior to sharing my answer. Upon submission he read it, smiled, then claimed that he had never heard that answer before 🙂
My answer was: “This analogy only holds if you are driving in reverse, this is comparable to exponential smoothing because in order to move forward you are looking behind you. In this case to estimate where you are heading you rely on past data.”
At the time that was all I could think off … he isn’t even sure if it’s correct… but at least he found it amusing.
Sarah: Exponential smoothing (while boring as hell) is a forecasting method that relies on using an average of previous data that keeps shifting with you; a.k.a moving average.