Deck 7: Demand Forecasting in a Supply Chain

Question 1

The result when each stage in the supply chain makes its own separate forecast is often a match between supply and demand,because these forecasts are often very different.

Answer 1

False

Question 2

Leaders in many supply chains have started moving toward collaborative forecasting to improve their ability to match supply and demand.

Answer 2

True

Question 3

Qualitative forecasting methods are most appropriate when there is good historical data available or when experts do not have market intelligence that is critical in making the forecast.

Answer 3

False

Question 4

Forecasts are always right.

Question 5

Causal forecasting methods find a correlation between demand and environmental factors and use estimates of what environmental factors will be to forecast future demand.

Question 6

Forecasts should include both the expected value of the forecast and a measure of forecast error.

Question 7

In general,the further up the supply chain a company is (or the further they are from the consumer),the smaller the distortion of information they receive.

Question 8

When all stages of a supply chain produce a collaborative forecast,it tends to be much more accurate.

Question 9

Forecasting and the accompanying managerial decisions are extremely difficult when either the supply of raw materials or the demand for the finished product is highly variable.

Question 10

For pull processes,a manager must forecast what customer demand will be in order to plan the level of available capacity and inventory.

Question 11

Time series forecasting methods are based on the assumption that past demand history is a good indicator of future demand.

Question 12

Long-term forecasts are usually more accurate than short-term forecasts.

Question 13

Simulation forecasting methods imitate the consumer choices that give rise to demand to arrive at a forecast.

Question 14

Time series forecasting methods are the most difficult methods to implement.

Question 15

Collaborative forecasting based on sales to the end customer can help enterprises further up the supply chain reduce forecast error.

Question 16

The forecast of demand forms the basis for all strategic and planning decisions in a supply chain.

Question 17

Mature products with stable demand are usually the most difficult to forecast.

Question 18

Aggregate forecasts are usually more accurate than disaggregate forecasts,as they tend to have a smaller standard deviation of error relative to the mean.

Question 19

For push processes,a manager must forecast what customer demand will be in order to plan the level of available capacity and inventory.

Question 20

Throughout the supply chain,all pull processes are performed in anticipation of customer demand,whereas all push processes are performed in response to customer demand.

Question 21

Marketing can utilize forecasts to make decisions concerning

A) scheduling.
B) promotions.
C) inventory control.
D) aggregate planning.
E) purchasing.

Question 22

The moving average forecast method is used when demand has an observable trend or seasonality.

Question 23

The resulting accuracy of a collaborative forecast enables supply chains to be

A) more responsive but less efficient in serving their customers.
B) both more responsive and more efficient in serving their customers.
C) less responsive but less efficient in serving their customers.
D) both less responsive and less efficient in serving their customers.
E) None of the above are true.

Question 24

A static method of forecasting assumes that the estimates of level,trend,and seasonality within the systematic component vary as new demand is observed.

Question 25

Leaders in many supply chains have started moving

A) toward independent forecasting to improve their ability to match supply and demand.
B) toward consecutive forecasting to improve their ability to match supply and demand.
C) toward sequential forecasting to improve their ability to match supply and demand.
D) toward collaborative forecasting to improve their ability to match supply and demand.
E) None of the above are true.

Question 26

Forecasting and the accompanying managerial decisions are relatively simple when either the supply of raw materials or the demand for the finished product is highly unpredictable.

Question 27

The basis for all strategic and planning decisions in a supply chain comes from

A) the forecast of demand.
B) sales targets.
C) profitability projections.
D) production efficiency goals.
E) all of the above

Question 28

The goal of any forecasting method is to predict the systematic component of demand and estimate the random component.

Question 29

For pull processes,a manager must forecast what customer demand will be in order to

A) plan the service level.
B) plan the level of available capacity and inventory.
C) plan the level of productivity.
D) plan the level of production.
E) none of the above

Question 30

The forecast error measures the difference between the forecast and the estimate.

Question 31

The objective of forecasting is to filter out the random component (noise)and estimate the systematic component.

Question 32

Forecasting and the accompanying managerial decisions are extremely difficult when either the supply of raw materials or the demand for the finished product is highly unpredictable.

Question 33

The result of each stage in the supply chain making its own separate forecast is

A) an accurate forecast.
B) a more accurate forecast.
C) a match between supply and demand.
D) a mismatch between supply and demand.
E) none of the above

Question 34

In adaptive forecasting,the estimates of level,trend,and seasonality are updated after each demand observation.

Question 35

Production can utilize forecasts to make decisions concerning

A) scheduling.
B) sales-force allocation.
C) promotions.
D) new product introduction.
E) budgetary planning.

Question 36

Long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts.

Question 37

Finance can utilize forecasts to make decisions concerning

A) scheduling.
B) promotions.
C) plant/equipment investment.
D) aggregate planning.
E) purchasing.

Question 38

For push processes,a manager must forecast what customer demand will be in order to

A) plan the service level.
B) plan the level of available capacity and inventory.
C) plan the level of productivity.
D) plan the level of production.
E) none of the above

Question 39

When all stages of a supply chain produce a collaborative forecast,it tends to be

A) much more detailed.
B) much more complex.
C) much more accurate.
D) much more flexible.
E) all of the above

Question 40

For pull processes,a manager must plan the level of available capacity and inventory but not the actual amount to be executed.

Question 41

One of the characteristics of forecasts is

A) aggregate forecasts are usually less accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually less accurate than short-term forecasts.
E) none of the above

Question 42

In general,the further up the supply chain a company is (or the further they are from the consumer),

A) the greater the distortion of information they receive.
B) the smaller the distortion of information they receive.
C) the information they receive is more accurate.
D) the information they receive is more useful.
E) none of the above

Question 43

One of the characteristics of forecasts is

A) aggregate forecasts are usually more accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually more accurate than short-term forecasts.
E) none of the above

Question 44

Forecasting methods that are primarily subjective and rely on human judgment are known as

A) qualitative forecasting methods.
B) time series forecasting methods.
C) causal forecasting methods.
D) simulation forecasting methods.
E) none of the above

Question 45

Aggregate forecasts are usually more accurate than disaggregate forecasts because

A) aggregate forecasts tend to have a larger standard deviation of error relative to the mean.
B) aggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
C) disaggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
D) disaggregate forecasts tend to have less standard deviation of error relative to the mean.
E) none of the above

Question 46

Which of the following is not a step to help an organization perform effective forecasting?

A) Understand the objective of forecasting.
B) Integrate demand planning and forecasting throughout the supply chain.
C) Understand and identify customer segments.
D) Identify and understand supplier requirements.
E) Determine the appropriate forecasting technique.

Question 47

Personnel can utilize forecasts to make decisions concerning

A) scheduling.
B) promotions.
C) plant/equipment investment.
D) workforce planning.
E) purchasing.

Question 48

The goal of any forecasting method is to

A) predict the random component of demand and estimate the systematic component.
B) predict the systematic component of demand and estimate the random component.
C) predict the seasonal component of demand and estimate the random component.
D) predict the random component of demand and estimate the seasonal component.
E) predict the trend component of demand and estimate the random component.

Question 49

Long-term forecasts are usually less accurate than short-term forecasts because

A) short-term forecasts have a larger standard deviation of error relative to the mean than long-term forecasts.
B) short-term forecasts have more standard deviation of error relative to the mean than long-term forecasts.
C) long-term forecasts have a smaller standard deviation of error relative to the mean than short-term forecasts.
D) long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts.
E) none of the above

Question 50

Which forecasting methods are the simplest to implement and can serve as a good starting point for a demand forecast?

A) Qualitative forecasting methods
B) Time series forecasting methods
C) Causal forecasting methods
D) Simulation forecasting methods
E) none of the above

Question 51

Qualitative forecasting methods are most appropriate when

A) there is good historical data available.
B) there is little historical data available.
C) experts do not have critical market intelligence.
D) forecasting demand into the near future.
E) trying to achieve a high level of detail.

Question 52

When either the supply of raw materials or the demand for the finished product is highly variable,forecasting and the accompanying managerial decisions

A) are extremely simple.
B) are relatively straightforward.
C) are extremely difficult.
D) should not be attempted.
E) none of the above

Question 53

Mature products with stable demand

A) are usually easiest to forecast.
B) are usually hardest to forecast.
C) cannot be forecast.
D) do not need to be forecast.
E) none of the above

Question 54

Time series forecasting methods are most appropriate when

A) there is little historical data available.
B) the basic demand pattern varies significantly from one year to the next.
C) the basic demand pattern does not vary significantly from one year to the next.
D) experts have critical market intelligence.
E) forecasting demand several years into the future.

Question 55

Forecasts are always wrong and therefore

A) should include both the expected value of the forecast and a measure of forecast error.
B) should not include both the expected value of the forecast and a measure of forecast error.
C) should only be used when there are no accurate estimates.
D) should be missing the expected value of the forecast and a measure of forecast error.
E) none of the above

Question 56

One of the characteristics of forecasts is

A) forecasts are always right.
B) forecasts are always wrong.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually more accurate than short-term forecasts.
E) none of the above

Question 57

Forecasting methods that imitate the consumer choices that give rise to demand to arrive at a forecast are known as

A) qualitative forecasting methods.
B) time series forecasting methods.
C) causal forecasting methods.
D) simulation forecasting methods.
E) none of the above

Question 58

Which of the following is not a forecasting method?

A) Qualitative
B) Time series
C) Causal
D) Simulation
E) All of the above are forecasting methods.

Question 59

Forecasting methods that assume that the demand forecast is highly correlated with certain factors in the environment (e.g.,the state of the economy,interest rates,etc.)to make a forecast are known as

A) qualitative forecasting methods.
B) time series forecasting methods.
C) causal forecasting methods.
D) simulation forecasting methods.
E) none of the above

Question 60

Forecasting methods that use historical demand to make a forecast are known as

A) qualitative forecasting methods.
B) time series forecasting methods.
C) causal forecasting methods.
D) simulation forecasting methods.
E) none of the above

Question 61

The measure of forecast error where the average absolute error of each forecast is shown as a percentage of demand is

A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question 62

________ forecasting methods are primarily subjective and rely on human judgment.

A) Qualitative
B) Time-series
C) Causal
D) Simulation

Question 63

A supermarket has experienced weekly demand of milk of D1 = 130,D2 =117,D3 =124,and D4 =142 gallons over the last four weeks.Forecast demand for Period 5 using a three-period moving average.

A) 128.25
B) 127.67
C) 133.00
D) 142.00

Question 64

________ forecasting methods use historical demand to make a forecast.

A) Qualitative
B) Time-series
C) Causal
D) Simulation

Question 65

________ forecasting methods assume that the demand forecast is highly correlated with certain factors in the environment (the state of the economy,interest rates,etc.).

A) Qualitative
B) Time-series
C) Causal
D) Simulation

Question 66

The measure of forecast error where the absolute amount of error of each forecast is averaged is

A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question 67

With respect to time-series methods,the systematic component measures the expected value of demand and does NOT consist of

A) level.
B) trend.
C) seasonality.
D) random component.

Question 68

The additive form of the systematic component of demand is shown as

A) level × trend × seasonal factor.
B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor.
D) level × (trend + seasonal factor).
E) (level × trend) + seasonal factor.

Question 69

The measure of forecast error where the amount of error of each forecast is squared and then an average is calculated is

A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question 70

Which of the following is not a necessary step to estimate the three parameters-level,trend,and seasonal factors of the systematic component of demand?

A) Deseasonalize demand and run linear regression to estimate level and trend.
B) Estimate seasonal factors.
C) Remove the trend factor of demand and run linear regression to estimate seasonal factors.
D) All of the above are steps.
E) None of the above are steps.

Question 71

The equation for calculating the systematic component may take a variety of forms.Which is not one of those forms listed in the text?

A) Associative
B) Multiplicative
C) Additive
D) Mixed

Question 72

The measure of how significantly a forecast method consistently over- or underestimates demand is

A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question 73

The trend corrected exponential smoothing (Holt's Model)forecast method is appropriate when

A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend but no seasonality.
D) demand has no observable level or seasonality.
E) none of the above

Question 74

The simple exponential smoothing forecast method is appropriate when

A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend and seasonality.
D) demand has no observable level or seasonality.
E) none of the above

Question 75

The measure of whether a forecast method consistently over- or underestimates demand is

A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) bias.
E) the tracking signal.

Question 76

The multiplicative form of the systematic component of demand is shown as

A) level × trend × seasonal factor.
B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor.
D) level × (trend + seasonal factor).
E) (level × trend) + seasonal factor.

Question 77

The moving average forecast method is used when

A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend and seasonality.
D) demand has no observable level or seasonality.
E) none of the above

Question 78

In adaptive forecasting

A) there is an assumption that the estimates of level, trend, and seasonality within the systematic component do not vary as new demand is observed.
B) the estimates of level, trend, and seasonality within the systematic component are not adjusted as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
E) None of the above are true.

Question 79

A static method of forecasting

A) assumes that the estimates of level, trend, and seasonality within the systematic component do not vary as new demand is observed.
B) assumes that the estimates of level, trend, and seasonality within the systematic component vary as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
E) None of the above are true.

Question 80

The mixed form of the systematic component of demand is shown as

A) level × trend × seasonal factor.
B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor.
D) level × (trend + seasonal factor).
E) (level × trend) + seasonal factor.