Holt-Winters Forecasting: Some Practical Issues

The Holt-Winters forecasting procedure is a variant of exponential smoothing which is simple, yet generally works well in practice, and is particularly suitable for producing short-term forecasts for sales or demand time-series data. Some practical problems in implementing the method are discussed, including the normalisation of seasonal indices, the choice of starting values and the choice of smoothing parameters. There is an important distinction between an automatic and a nonautomatic approach to forecasting and detailed suggestions are made for implementing Holt-Winters in both ways. The question as to what underlying model, if any, is assumed by the method is also addressed. Some possible areas for future research are then outlined.