Supply Chain Management M4L5

When the forecast is too low, the forecast error is _______. negative positive

positive

If the forecasts on average are too low, RSFE and MFE will be _______. positive negative

positive

Some measures of forecast accuracy include the running sum of forecast errors, the mean absolute percentage error, and mean forecast error. The formula for each is dependent on the forecast error, which is calculated by using the equation: Actual demand for period t plus the forecasted demand for period t Actual demand for period t minus the forecasted demand for period t The average of actual demand for period t and forecasted demand for period t Actual demand for period t divided by the forecasted demand for period t

Actual demand for period t minus the forecasted demand for period t

The costs associated with prediction error can be substantial. Which of the following is a potential cost: Lost sales Safety stock Dissatisfied customers All of the above None of the above

All of the above

Forecast ____________ describes whether we are on average forecasting too high or low. Magnitude Bias

Bias

In order to manage forecast accuracy, companies must: I. Measure forecast error II. Monitor forecast error III. Make forecast adjustments based forecast error I & III I and II II & III I, II & III

I, II & III

MAPE is used to measure forecast error __________ Bias Magnitude Safety stock both a and b

Magnitude

Assume two SKUs have the same MAPE. Must they also have the same standard deviation of forecast error? Yes No

No

Based on the table below, which product's forecast indicates the lowest magnitude of forecast error? Product Mean Absolute Percent Error (MAPE) Mean Forecast Error (MFE) A 14% 300 B 10% 210 C 6% 525 D 14% 500 Product A Product D Product B Product C

Product C

Based on the table below, which product's forecast is the least biased? Product Mean Absolute Percent Error (MAPE) Mean Forecast Error (MFE) Standard Deviation of Forecast Error A 8% 650 68,486 B 20% 675 70,520 C 19% 405 42,445 D 17% 500 52,232 Product C Product A Product D Product B

Product C

Which forecast error metric is used in the traditional calculation of safety stock in automated systems? Mean absolute percent error (MAPE) Running sum of forecast error (RSFE) Standard deviation of forecast error Mean forecast error (MFE)

Standard deviation of forecast error

The RSFE and MFE are used to measure ______ in forecast error. magnitude standard deviation error bias

bias

Forecast ______ describes whether we are on average forecasting too high or low while forecast _______ measures the size of the forecast error, irrespective of the ___________ of the error. bias, magnitude, direction direction, bias, magnitude magnitude, bias, direction magnitude, direction, bias

bias, magnitude, direction

Which forecast error metric is used to measure forecast error bias? Mean forecast error (MFE) Mean absolute percent error (MAPE) Standard deviation of forecast error Running sum for forecast error (RSFE) both a and d

both a and d

Which forecast error metric is used to measure forecast error magnitude? Mean forecast error (MFE) Mean absolute percent error (MAPE) Standard deviation of forecast error Running sum for forecast error (RSFE) both b and c

both b and c

A forecast is known to be unbiased. The magnitude must then _____. have a low magnitude of error have zero magnitude of error cannot tell what magnitude would be from the bias. have a large magnitude of error

cannot tell what magnitude would be from the bias

As the prediction error increases, safety stock costs ______________. decrease increase do not change

increase

Assume the two SKUs have the same MAPE. However, SKU A has a lower standard deviation of forecast error than SKU B. All other things being equal, we would carry ______ safety stock for SKU A.

less

If forecast error is positive, then the forecast was too ______. low high

low

The measure of forecast error where the average absolute error of each forecast is shown as a percentage of actual demand is mean forecast error (MFE). bias. mean absolute percent error (MAPE). running sum of forecast error (RSFE).

mean absolute percent error (MAPE)

Calculating the __________ means taking the running sum of the forecast errors and dividing it by the number of observations or the number of forecasts. standard deviation of forecast error mean forecast error mean square error mean absolute deviation

mean forecast error

Assume the two SKUs have the same MAPE. However, SKU A has a higher standard deviation of forecast error than SKU B. All other things being equal, we would carry ______ safety stock for SKU A. more less about the same cannot tell from the information given

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