Chapter 3 - Forecasting

In the food industry, collaborative planning, forecasting, and replenishment (CPFR) is estimated to generate cost savings of ________ each year. Multiple choice question. $3 million $3 billion $30 billion $300 billion

$30 billion

What is the first step in CPFR? Multiple choice question. Sharing forecasts Creation of a front-end partnership agreement Development of demand forecasts Joint business planning

Creation of a front-end partnership agreement

What term refers to repetitive activity that happens in other than annual recurrent periods? Multiple choice question. Random Seasonal Cyclical Trend

Cyclical

True or false: When calculating the running sum of forecast errors (RSFE), the sign is irrelevant for each error term. True false question. True False

False

True or false: Linear regression cannot be used for causal relationship forecasting. True false question. True False

False Reason: Linear regression can be used for both time series analysis and causal relationship forecasting.

True or false: Regression relationships are usually developed from observed data. True false question. True False

True Reason: Regression relationships are usually developed from observed data.

Which smoothing constant adjusts for trend? Multiple choice question. δ β α λ

δ - Delta

The exponential forecasting model uses the following data to calculate a forecast: Multiple select question. Actual demand for most recent forecast period Smoothing constant delta Smoothing constant alpha Most recent forecast

-Actual demand for most recent forecast period -Smoothing constant alpha -Most recent forecast

Which of the following statements is true about linear regression forecasting? Multiple select question. Linear regression is used for time series forecasting. Linear regression estimates demand using a line of the form Yt = a +bt. Linear regression has no serious drawbacks. Linear regress is used for causal forecasting.

-Linear regression is used for time series forecasting. -Linear regression estimates demand using a line of the form Yt = a +bt. -Linear regress is used for causal forecasting.

Exponential smoothing constants must be given a value between? Multiple choice question. 1 and 10 0 and 100 0 and 1 0 and 10

0 and 1

1 MAD is approximately how many standard deviations? Multiple choice question. 0.8 1.25 √π2π2 1

0.8

The weights on each element in a weighted moving average must equal _____. Multiple choice question. 10 100 1000 1

1

The forecast for last period was 100 units. Actual demand was 110 units. What was the forecast error? Multiple choice question. 110 units 0 units 10 units 20 units

10 units

Historical demand for an item is shown in the table below. If a forecaster wishes to use weights of 0.5 (for the most recent data), 0.3 (for data that is two weeks old), and 0.2 (for data that is three weeks old), what is the weighted moving average forecast for week 6? Week - Demand 1 - 100 2 - 150 3 - 200 4 - 150 5 - 180

175

To calculate MAD and summing up the forecasts errors, the value used for ||18−20||18-20 in the calculation is? Multiple choice question. 2 Either 2 or -2 -2 Cannot be computed

2

For the past 10 periods, MAD was 25 units while total demand was 1,000 units. What was mean absolute percent error (MAPE)? Multiple choice question. 10% 25% 50% 75%

25% Reason: MAPE=MAD/AverageDemand =25 / (1000/10) =0.25=25%

Which smoothing constant controls the speed of reaction to differences between forecasts and actual demand? Multiple choice question. Delta Alpha Beta Gamma

Alpha

Currently, most applications of collaborative planning, forecasting, and replenishment (CPFR) have been in which industries? Multiple select question. Agriculture Apparel General Merchandise Food

Apparel General Merchandise Food

Demand trends include which of the following? Multiple select question. Asymptotic S-curve Linear Circular

Asymptotic S-curve Linear

The smoothing constant values depend on which of the following? 1. How much random variation there is in demand. 2. How steady the trend factor is. Multiple choice question. Neither 1 nor 2 Both 1 and 2 2 1

Both 1 and 2

What web-based tool is being used as a means to integrate members of a supply chain? Multiple choice question. Online auctions E-procurement E-Commerce CPFR

CPFR

Which of the four basic types of forecasting assumes that demand is related to some underlying factor in the environment? Multiple choice question. Qualitative Forecasting Time Series Analysis Causal Forecasting Simulation Models

Causal Forecasting

Using the number of cars passing by a restaurant to predict sales is an example of which type of forecasting? Multiple choice question. Simulation Time Series Forecasting Causal Relationship Forecasting Traffic Analysis

Causal Relationship Forecasting

What term describes the process of identifying and separating time series data into components? Multiple choice question. Decomposition Additive Aggregation Multiplicative

Decomposition Reason: Decomposition is the process of breaking a time series into fundamental components such as trend and seasonality.

The ______ method conceals the identity of participates and gives every participant the same influence.

Delphi

Which qualitative technique develops a forecast by polling participants multiple times on expected forecasts? Multiple choice question. Historical Analogy Panel Consensus Market Research Delphi Method

Delphi Method

Which of the following is not a reason why exponential smoothing has been well accepted? Multiple choice question. Little computation is required to use the model. Formulating the model is relatively difficult. Models are surprisingly accurate. Users can understand how the model works.

Formulating the model is relatively difficult.

Which measurement of error measures the dispersion of some observed value from some expected value? Average Demand Mean Absolute Percent Error Mean Absolute Deviation Tracking Signal

Mean Absolute Deviation Reason: MAD calculates the average absolute value of the forecast error.

Which is the larger measure, the standard deviation or MAD? Multiple choice question. Standard deviation MAD They are equal There is no relation between these measures

Standard deviation

In an exponential smoothing model, what is the function of the smoothing constant alpha (α)? Multiple choice question. To adjust for trends in the data. To determine how much of the historical data to consider for inventory restock. To allow for an increase in the forecast to avoid shortages. To control how quickly the model reacts to differences between the forecast and actual demand.

To control how quickly the model reacts to differences between the forecast and actual demand.

Which measurement of error can be used to detect forecast bias? Multiple choice question. Mean Absolute Deviation (MAD) Mean Absolute Percent Error (MAPE) Running Sum of Forecast Error (RSFE) Tracking Signal (TS)

Tracking Signal (TS)

In the decomposition process, time series data can be separated into which of the following elements? Multiple select question. Trend Seasonality Cyclical Forecast

Trend Seasonality Cyclical

True or false: Additive seasonal variation occurs when the seasonal change in demand is constant. True false question. True False

True

True or false: Historical analogies are useful for forecasting new products with similar growth patterns and concepts of previous products. True false question. True False

True

True or false: Mean absolute deviation (MAD) calculates the average absolute value of the forecast error. True false question. True False

True

Bias errors occur when _____. Multiple choice question. a forecast is neither too high nor too low. a forecast is incorrect. a forecast is consistently too high (or too low). a forecast alternates between too high and too low.

a forecast is consistently too high (or too low).

Mean absolute percent error (MAPE) represents the average error as Multiple choice question. a fraction. a percentage of total demand. a percentage of total error. a percentage of average demand.

a percentage of average demand.

Mean absolute percent error (MAPE) represents the average error as Multiple choice question. a percentage of average demand. a percentage of total error. a fraction. a percentage of total demand.

a percentage of average demand.

The main disadvantage of the moving average is that Multiple choice question. all individual data elements must be carried as data. it is difficult to calculate. it drops the most current data point. it is time consuming to calculate.

all individual data elements must be carried as data.

A moving average forecast is based on Multiple choice question. average past demand. minimum past demand. future demand. maximum past demand.

average past demand.

When a consistent mistake is made in a forecast, this is classified as ___________ error. Multiple choice question. forecast random calculated bias

bias

Regression is defined as a functional relationship between two or more __________ variables. Multiple choice question. random correlated uniform observed

correlated

To adjust for trends, exponential smoothing uses a second smoothing constant called Multiple choice question. delta (δ). epsilon (ε). pi (π). sigma (σ).

delta (δ).

Tactical forecasts are typically used to estimate demand for the next __________. Multiple choice question. few years few hours few weeks or months long term contract renewal

few weeks or months

The difference between the actual demand and the forecast is referred to as Multiple choice question. inevitable. deviation. forecast error. trend.

forecast error.

In linear regression, the ____________ variable is plotted on the horizontal axis and the __________ variable is plotted on the vertical axis. Multiple choice question. new; old old; new dependent: independent independent; dependent

independent; dependent

When the amount of seasonal variation depends upon the trend or average amount, the seasonality is described as Multiple choice question. additive seasonality. variable seasonality. seasonal index. multiplicative seasonality.

multiplicative seasonality.

A random error is any error that is Multiple choice question. not explained by the forecast model. caused by employing the wrong trend line. not observed in forecasting. explained by the forecast model.

not explained by the forecast model.

A causal relationship implies that Multiple choice question. two variables change independently of each other. one variable changes because of a change in another variable. two variables both change as a result of a change in a third variable.

one variable changes because of a change in another variable. Reason: A causal relationship implies that one variable changes because of a change in another variable.

CPFR coordinates all of the following except Multiple choice question. inventory replenishment. demand forecasting. production and purchasing planning. transportation.

transportation.

Which qualitative technique develops a forecast by polling participants multiple times on expected forecasts? Multiple choice question. Panel Consensus Delphi Method Historical Analogy Market Research

Delphi Method

Point-of-sale (POS) data would be used in which step of the CPFR process? Multiple choice question. Joint business planning Development of demand forecasts Sharing forecasts Inventory replenishment

Development of demand forecasts

True or false: Multiplicative seasonality occurs when the seasonal change is constant, regardless of trend or average demand. True false question. True False

False Reason: Multiplicative seasonality multiplies the trend by a seasonal factor, because its size depends on the trend and is not constant as with additive seasonal variation.

True or false: The main disadvantage of moving average forecasts is the difficulty of the calculations involved. True false question. True Reason: The main disadvantage of moving average forecasts is the need to maintain all individual data elements. False

False - The main disadvantage of moving average forecasts is the need to maintain all individual data elements.

When decomposing a time series into its components, you do all of the following except: Multiple choice question. Project trend component into the future. Find trend component. Find seasonal component of past data. Deseasonalize the demand.

Project trend component into the future.

What type of forecasts rely on the knowledge of experts and require judgment? Multiple choice question. Random Qualitative Subjective Quantitative

Qualitative

Forecasts which use subjective or judgmental techniques are known as? Multiple choice question. Quantitative Forecasts Time Series Forecasts Causal Forecasts Qualitative Forecasts

Qualitative Forecasts

A tracking signal is represented by which of the following ratios? Multiple choice question. MAD / RSFE MAPE / RSFE RSFE / MAPE RSFE / MAD

RSFE / MAD

Which component of demand reflects the effects of chance events? Multiple choice question. Seasonal Elements Random Variation Cyclical Elements Trend

Random Variation

Which of the following are characteristics of qualitative forecasting techniques? Multiple select question. Most useful when historical demand data is easily obtained. Takes advantage of expert knowledge. Requires the use of a computer to complete calculations. Requires significant levels of judgment.

Takes advantage of expert knowledge. Requires significant levels of judgment.

All of the following are reasons why exponential smoothing has become well accepted EXCEPT: Multiple choice question. Tests for accuracy are difficult Models are surprisingly accurate Formulating the model is easy Low computer storage requirements

Tests for accuracy are difficult

The difficulty with using a panel consensus is that lower-level employees may be intimidated by higher levels of management. True false question. True False

True

True or false: Regression relationships are usually developed from observed data.

True

A forecast based on average past demand is a Multiple choice question. static average forecast. quantitative forecast. linear regression forecast. moving average forecast.

moving average forecast.

If an error cannot be explained by the forecast model being used, it is called ________ error. Multiple choice question. unexplained random forecast mysterious

random

The weighted moving average allows _______ data to be given more significance than _________ data. Multiple choice question. older; recent past; older recent; older older; past

recent; older

Tactical forecasts are _________ term, while strategic forecasts are _____________ term. Multiple choice question. short; long medium; long short and medium; long short; medium and long

short; medium and long

Qualitative forecasts are ____________ while quantitative forecasts are __________________. Multiple choice question. subjective; numerical numerical; numerical numerical; subjective subjective; subjective

subjective; numerical

Market research uses data collection methods that are primarily ___________________. Multiple choice question. executive judgment historical data surveys and interviews collaborative planning

surveys and interviews

A firm is reluctant to initiate collaborative planning, forecasting, and replenishment because they feel their suppliers may use the process to justify higher prices. This firm is experiencing: Multiple choice question. Competitive pressure Concern about security breaches Resistance to change Lack of trust

Lack of trust

Which of the following are challenges associated with the implementation of collaborative planning, forecasting, and replenishment (CPFR)? Multiple select question. Lack of trust Inability to identify supply chain partners Resistance to change Concern about security breaches

Lack of trust Resistance to change Concern about security breaches

Which of the following ratios correctly calculates the MAPE? Multiple choice question. MAD / (Average demand) (Average demand) / MAD RSEF / (Average demand) RSFE / MAD

MAD / (Average demand)

Which measurement of error represent the average error measured as a percentage of average demand? Multiple choice question. TS MAPE MAD RSFE

MAPE

Which of the following statements about multiple regression analysis are true? Multiple select question. Microsoft Excel supports multiple regression analysis. Multiple regression is appropriate when there are several important factors influencing a variable of interest. Multiple regression analysis cannot be used with leading indicators. Multiple regression requires gathering more data than is necessary for exponential smoothing forecasts.

Microsoft Excel supports multiple regression analysis. Multiple regression is appropriate when there are several important factors influencing a variable of interest. Multiple regression requires gathering more data than is necessary for exponential smoothing forecasts.

When considering more than one variable, along with the effects of each variable on the item of interest, which forecasting model should be used? Multiple choice question. Multiple Regression Linear Regression Time Series Seasonal

Multiple Regression

Which qualitative forecasting technique is based upon the idea that a group of people with various backgrounds can develop a more reliable forecast than a narrower group? Multiple choice question. Market Research Panel Consensus Historical Analogy Gamma Method

Panel Consensus

Which of the following are examples of qualitative forecasting? Multiple select question. Linear Regression Analysis Panel Consensus Time Series Analysis Market Research

Panel Consensus Market Research

Match the forecasting technique with its description. Instructions Drag and drop application. ---Qualitative Uses subjective or judgmental approach. ---Time Series Analysis Uses past data to predict future demand. ---Causal Forecasting Assumes that demand is related to some underlying factor in the environment. ----Simulation Allows the forecaster to run through a range of assumptions.

See left

When the change in demand due to seasonality is a constant amount, regardless of trend or average, the seasonal variation is described as Multiple choice question. multiplicative seasonal variation. additive seasonal variation. seasonal index variation. constant seasonal variation.

additive seasonal variation.

The exponential smoothing constant delta(δ) performs what function? Multiple choice question. Reduces the impact of the error between the actual demand and forecasts. Increases the impact of the error between the actual demand and forecasts. Eliminates the impact of the error between the actual demand and forecasts. Estimates the impact of the error between the actual demand and forecasts.

Reduces the impact of the error between the actual demand and forecasts.

What term refers to the amount of correction needed in a time series to adjust for the time of the year? Multiple choice question. Seasonal Trend Seasonal Factor Seasonal Variation Seasonal Adjustment

Seasonal Factor

What type of forecasts are used for forecast decisions related to strategy and aggregate demand? Multiple choice question. Tactical Aggregate Operational Strategic

Strategic

Which of the following is not an example of a qualitative forecasting technique? Multiple choice question. Gamma Method Market Research Panel Consensus Historical Analogy

Gamma Method

When releasing a new product that is similar to an existing product, one could use which qualitative technique to develop a forecast? Multiple choice question. Market Research Historical Analogy Panel Consensus Delphi Method

Historical Analogy

Which of the following is true about the tracking signal? Multiple select question. A tracking signal of zero indicates a biased forecast. A tracking signal of 5 or higher indicates a good forecast. It can be positive, negative, or zero. The tracking signal is equal to RSFE/MAD

It can be positive, negative, or zero. The tracking signal is equal to RSFE/MAD

Which measurement of error is calculated by dividing the sum of the absolute forecast errors by the number of periods? Multiple choice question. TS MAPE MAD RSFE

MAD

What time horizon(s) are used for strategic forecasts? Multiple choice question. Long-term. Medium term. Short and medium term. Medium and long-term.

Medium and long-term.

What is the function of a seasonal component or factor? Multiple choice question. The seasonal factor identifies the type of seasonality present in a time series. The seasonal factor projects the forecast into the future. The seasonal factor adjusts a time series for the time of year. The seasonal factor determines the error of a forecast.

The seasonal factor adjusts a time series for the time of year.

When including trend effects in exponential smoothing, how many smoothing constants are required? Multiple choice question. None One - alpha (α) Three - alpha (α), epsilon(ε), and delta (δ) Two - alpha (α) and delta (δ)

Two - alpha (α) and delta (δ)

Jenna believes that more recent data should be given more significance than older data. Which forecasting model should she select? Multiple choice question. Simple Moving Average Complex Moving Average Weighted Moving Average

Weighted Moving Average

One way to overcome the major restriction of linear regression forecasting is to Multiple choice question. Adjust data to create a straight line. use a shorter period of history to prepare the forecast. consider only every other data point. use a longer period of history to prepare the forecast.

use a shorter period of history to prepare the forecast.

Place the steps of the decomposition using least squares regression process into chronological order.

1. Determine the seasonal factor 2. Deseasonalize the original data 3. Develop a regression line for the deseasonalized data 4. Project the regression line over the forecast period 5. Adjust the regression line using the seasonal factor.

Which type of seasonal variation assumes that the seasonal amount is a constant? Multiple choice question. Seasonal Index Multiplicative Additive Seasonal Factor

Additive Reason: Additive seasonal variation assumes that the seasonal variation is constant regardless of the trend or average amount.

Which forecasting model incorporates independent variables other than time to predict future demand? Multiple choice question. Linear regression Exponential Linear regression with trend Causal relationship

Causal relationship

When the most recent occurrences are more indicative of the future than those in the distant past, one should use which time series model? Multiple choice question. Complex Moving Average Exponential Simple Moving Average Linear Regression

Exponential Reason: Exponential smoothing models assign more importance to the most recent data.

The most widely used forecasting technique is? Multiple choice question. Complex Moving Average Simple Moving Average Linear Regression Exponential Smoothing

Exponential Smoothing

Which time series forecasting model uses weights that decrease at a rate of (1 - α) for each past period? Multiple choice question. Simple moving average Delta Linear Regression Exponential smoothing

Exponential smoothing

The forecasting technique that fits a straight line to past data to allow projections of the future is known as Multiple choice question. linear regression forecasting. qualitative forecasting. weighted moving average forecasting. exponential smoothing forecasting.

linear regression forecasting.

A qualitative forecasting technique that is useful for identifying what consumers like and dislike about a product is _______________. Multiple choice question. historical analogy market research panel consensus Delphi method

market research