Deck 7: Demand Forecasting in a Supply Chain

Question 1

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 1

False

Question 2

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

Answer 2

True

Question 3

Most firms that employ forecasting do not maintain any estimates of forecast error.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

Excel's Solver function should be used to minimize the forecast errors in a model.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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.

Question 20

A static time-series method should be used when the estimates for level,seasonality and trend may be based solely on historical data.

Question 21

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.

Question 22

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.

Question 23

The =MAPE(array1,array2)function in Excel can calculate the mean absolute percent error of any two data arrays of the same size.

Question 24

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.

Question 25

Production can utilize forecasts to make decisions concerning

A)scheduling.
B)sales-force allocation.
C)promotions.
D)hiring decisions.

Question 26

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.

Question 27

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.

Question 28

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.

Question 29

Personnel can utilize forecasts to make decisions concerning

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

Question 30

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.

Question 31

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.

Question 32

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.

Question 33

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.

Question 34

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.

Question 35

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.

Question 36

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.

Question 37

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.

Question 38

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.

Question 39

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 more accurate the information they receive.
D)the more useful the information they receive.

Question 40

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.

Question 41

Scenario 7.2 - Gulab Greatness
Historical demand for gulab jamun from a sweet stall on Commercial Road is as displayed in the table.

Use a simple moving average of three periods to forecast the demand for October.What is the forecast?

A)70,252
B)70,722
C)69,842
D)71,212

Question 42

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).

Question 43

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.

Question 44

Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.

What is the level component of Holt's model for period 0?

A)-2.5
B)10.3
C)2.5
D)6.4

Question 45

________ 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 46

Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.

Use exponential smoothing to forecast the demand for March.What is the forecast if α = 0.7?

A)17.58
B)18.26
C)18.74
D)19.32

Question 47

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).

Question 48

Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.

Use a simple moving average of three periods to forecast the demand for July.What is the forecast?

A)67
B)58
C)48.5
D)45.3

Question 49

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.

Question 50

________ forecasting methods use historical demand to make a forecast.

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

Question 51

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

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

Question 52

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).

Question 53

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.

Question 54

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.

Question 55

What does deseasonalizing a data set accomplish?

A)It removes the wavelike pattern from the data.
B)It removes all point-to-point variation from the data.
C)It removes all change in level from the data.
D)It removes the progression from one point to another from the data.

Question 56

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.

Question 57

Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.

What is the trend component of Holt's model for period 0?

A)-2.5
B)10.3
C)2.5
D)6.4

Question 58

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

Question 59

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.

Question 60

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.

Question 61

Scenario 7.3
The Entrepreneurship professor had a habit of oversupplying extra credit opportunities for his class each semester and his colleagues delighted in trying to forecast his class enrollment from one semester to the next.The forecasts for one colleague,along with the actual class enrollment,appear in the table.

Calculate the MSE for this scenario.

A)106.60
B)119.80
C)108.54
D)112.20

Question 62

Scenario 7.2 - Gulab Greatness
Historical demand for gulab jamun from a sweet stall on Commercial Road is as displayed in the table.

Use exponential smoothing to forecast the demand for July.What is the forecast if α = 0.4 and the forecast for May was 69,000?

A)69,346
B)69,379
C)69,500
D)69,298

Question 63

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)the tracking signal.

Question 64

What is the forecast for June using Holt's model with an alpha of 0.1 and a beta of 0.2?

A)69,612
B)69,121
C)70,082
D)70,499

Question 65

The ________ is a good measure of forecast error when the underlying forecast has significant seasonality and demand varies considerably from one period to the next.

A)MAD
B)MSE
C)MKE
D)MAPE

Question 66

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

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

Question 67

Use Solver to determine the alpha that minimizes the MSE for the exponential smoothing forecast for the data that appear in this table.Use the actual demand of period 1 as the forecast for period 2 and then use the forecasts for periods 2 through 9 to calculate MSE.

A)0.39
B)0.48
C)0.57
D)0.66

Question 68

What Excel function/feature should be used to minimize the mean squared error for an exponential smoothing model?

A)Solver
B)=EXPON
C)=ALPHA
D)Goal seek

Question 69

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 percentage error (MAPE).
C)bias.
D)the tracking signal.

Question 70

What Excel function/feature should be used to calculate a moving average?

A)Solver
B)=AVERAGE
C)=MAVE
D)Goal seek

Question 71

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.

Question 72

What is the mean absolute percentage error?

A)5.24%
B)5.61%
C)5.40%
D)5.06%

Question 73

Describe the basic characteristics of forecasts that managers should be aware of.

Question 74

Use Solver to determine the alpha that minimizes the MAD for the exponential smoothing forecast for the data that appear in this table.Use the actual demand of period 1 as the forecast for period 2 and then use the forecasts for periods 2 through 9 to calculate MAD.

A)0.36
B)0.43
C)0.54
D)0.62

Question 75

Scenario 7.3
The Entrepreneurship professor had a habit of oversupplying extra credit opportunities for his class each semester and his colleagues delighted in trying to forecast his class enrollment from one semester to the next.The forecasts for one colleague,along with the actual class enrollment,appear in the table.

Calculate the MAD for this scenario.

A)10.04
B)8.99
C)10.40
D)9.25

Question 76

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)bias.
D)the tracking signal.

Question 77

Which of the following is a commonly used measure for measuring forecast error?

A)MDE
B)MKE
C)MAD
D)MES

Question 78

What is the largest value for the tracking signal (either under or overforecasting)?

A)0.955
B)-3.188
C)1.004
D)2.623

Question 79

What is the level component of Holt's model for period 0?

A)78,666
B)642
C)462
D)66,768

Question 80

What is the trend component of Holt's model for period 0?

A)642
B)66,768
C)462
D)78,666