Question 1

Demand for many products changes periodically, often due to a predictable influence. These influences include ________ factors that affect products.

Accepted Answer

Demand for many products changes periodically, often due to a predictable influence. These influences include seasonal factors that affect products; for example, the fluctuating demand for lawn mowers and ski jackets depending on season.

Question 2

Apart from seasonal factors, ______ factors can also cause large declines in sales.

Accepted Answer

Apart from seasonal factors, non-seasonal factors such as promotions or product adoption rates can also cause large and predictable increases or decreases in sales.

Question 3

____________ is a change in demand that can be forecasted. Products that that undergo this type of change in demand cause numerous problems in a supply chain.

Accepted Answer

Predictable variability is a change in demand that can be forecasted. Products that that undergo this type of change in demand can create numerous problems in a supply chain, ranging from high levels of stock outs during peak demand periods to high levels of excess inventory during periods of low demand.

Question 4

When faced with predictable variability, a company's goal is to respond in a manner that maximizes profitability. A firm must choose how to handle this by managing the supply using capacity, inventory, subcontracting, and backlogs and managing the demand using __________________.

Accepted Answer

If faced with predictable variability, a company's goal is to respond in a manner that maximizes profitability. A firm must choose how to handle it by managing supply using capacity, inventory, subcontracting and backlogs and managing demand using short-term price discounts and trade promotions. The use of these tools enables the supply chain to greatly increase its profitability because it is able to meet supply and demand in a much more coordinated fashion.

Question 5

Consider Green Gardening Tools. Demand for garden tools is seasonal, with sales concentrated in the spring. Green Gardening needs to plan how it will meet the demand to maximize profit. One way to meet demand requires Green Gardening to carry enough manufacturing capacity to meet demand in any period.
The advantage of this approach is ________________.

Accepted Answer

If the demand for garden tools is seasonal, with sales concentrated in the spring. Green Gardening needs to plan how it will meet the demand to maximize profit. One way to meet demand requires Green Garden to carry enough manufacturing capacity to meet demand in any period. The advantage of this approach is that Green Garden incurs very low inventory, because no inventory needs to be carried from period to period.

Question 6

Let's suppose that Green Gardening Tools applies another approach to meet demand in which it builds up inventory during the off-season to keep production stable year round. What would be the advantage and the disadvantage of this approach?

Accepted Answer

If Green Gardening Tools applies the approach of building up inventory during the off-season to keep production stable year round they would be able to have a smaller, less expensive factory. However with high inventory carrying costs the disadvantage of the approach is that it has higher inventory carrying costs.

Question 7

What best describes the term market growth?

Accepted Answer

Market growth refers to an increase in consumption of the product either from new or existing customers. Toyota provides an example. When Toyota offers a price promotion on the Camry, they may attract buyers who were considering the purchase of a lower-end model. Thus, the promotion increases the size of the overall family sedan market, as well as increasing Toyota's sales.

Question 8

Which of the following is considered a factor that influences the timing of a trade promotion?

Accepted Answer

Trade promotion refers to marketing activities that are executed in retail between two partners. Trade promotion is a marketing practice aimed at increasing demand for products in retail stores based on display fixtures, demonstrations, special pricing, value-added bonuses, no-obligation gifts, and more. It has four key factors that influence its timing: impact of the promotion of demand, product margins, cost of holding inventory, and changing capacity.

Question 9

Toyota offers a Corolla promotion. Buyers who might have purchased a Honda Civic may now purchase a Corolla. This example best describes:

Accepted Answer

Stealing share is when customers substitute a firm's products for a competitor's product. For example if Toyota offers a Corolla promotion, buyers who might have purchased a Honda Civic may now purchase a Corolla. Thus the promotion increases Toyota's sales while keeping the overall size of the family sedan market the same.

Question 10

________is the process in which customers move up future purchases to the present.

Accepted Answer

Forward buying is the process in which customers move up future purchases to the present. A promotion on a Toyota Camry, for example, may attract buyers now who would have purchased a Camry a few months later without the promotion's influence. The promotion does not increase Toyota's sales in the long run and also leaves the family sedan market the same size.

Question 11

The source for all strategic and planning decisions in a supply chain is called: _______.

Accepted Answer

The forecasting of demand is the basis for all strategic and planning decisions in a supply chain. It is essential to a supply chain manager's decision-making processes.

Question 12

According to the APICS dictionary, the forecast which projects a company's sales is called:

Accepted Answer

Demand forecasting is the activity of estimating the quantity of a product or service that consumers will obtain. Similarly, a demand forecast is the prediction of what will happen to a company's existing product sales.

Question 13

What should both companies and their supply chains be aware of about demand forecasting?

Accepted Answer

Companies and supply chain managers should be aware that forecasts are sometimes wrong and can cost a firm a lot damage if relied on completely. When forecasting, therefore, one should include both the expected value and its ratio of forecast error so that if the values are not correct remedies can be taken.

Question 14

________ forecasts are usually less accurate than short-term forecasts.

Accepted Answer

Long-term forecasts are usually less accurate than short-term forecasts because long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts. For example, suppose a general store manager places an order by 11 A.M. to be delivered by 8 P.M the same day. The manager has a forecast of what will sell less than 13 hours before the actual sale. The short lead-time allows the manager to take into account current information, such as weather, which could affect product sales. This forecast is likely to be more accurate than if the store manager had to forecast demand a week in advance.

Question 15

Forecasting methods are classified into which of the following types?

Accepted Answer

Forecasting methods are classified into four types: qualitative, time series, causal and simulation. A supply chain firm must use multiple forecasting to ensure effective results rather than using individual methods.

Question 16

Time series forecasting methods use _______ to make a forecast.

Accepted Answer

Time series forecasting methods use historical demand data to make a forecast. They are usually based on the assumption that past demand history is a good indicator of future demand.

Question 17

Causal forecasting methods find the correlation between_______ and ________.

Accepted Answer

Causal forecasting methods assume that demand forecast is highly correlated with certain factors in the environment; therefore, it finds the correlation between demand and environment and uses estimates of what environmental factors will be in order to forecast future demand. For example, product pricing is strongly correlated with demand. Thus, companies can use casual methods to determine the impact of price promotions on demand.

Question 18

A firm can combine time series and causal forecasting method to answer impact of a price. This can only be possible using what method?

Accepted Answer

Simulation forecasting methods replicate the consumer choices that give rise to demand in order to arrive at a forecast. Using simulation forecasting can combine time series and causal forecasting method to understand the impact of a price.

Question 19

Observed demand (O) = ____________________+______________________.

Accepted Answer

In time series methods, when a company attempts to forecast demand based on history, then the historical demand, growth patterns, and any seasonal patterns will influence the forecast. With this method there is always a random element that cannot be explained by historical demand patterns. Therefore any observed demand can be broken down into a Systematic (S) and Random (R) component, i.e. O=S + R.

Question 20

A forecast error can be best defined as:

Accepted Answer

Forecast error measures the random component of demand. This measure is important because it reveals how inaccurate a forecast is likely to be and what contingencies a firm may have to plan for.

Quiz 3: Demand