Supply Chain: Chapter 18

Demand for products or services can be broken down into six components...

-Average demand for the period -A trend -Seasonal elements -Cyclical elements -Random variation -Autocorrelation

Sources of bias include...

-Failure to include the right variables -The use of wrong relationships among variables -Employing the wrong trend line -A mistaken shift in the seasonal demand from where it normally occurs -The existence of some undetected secular trend

Basic Types of Forecasting (4)

-Qualitative -Time Series Analysis -Casual Relationships -Simulation

Which forecasting model a firm should choose depends on these 5 things

-Time Horizon to Forecast -Data Availability -Accuracy Required -Size of Forecasting Budget -Available of Qualified Personnel

If you were selecting from a variety of forecasting models based on MAD, which of the following MAD values from the same data would reflect the most accurate model?

.2 (or the smallest option)

A company wants to forecast demand using the weighted moving average. If the company uses two prior yearly sales values (i.e., year 2012= 110 and year 2013= 130), and we want to weight the year 2012 at 10 percent and the year 2013 at 90 percent, which of the following is the weighted moving average forecast for year 2014?

128

A company wants to forecast demand using the simple moving average. If the company uses four prior yearly sales values (i.e., year 2010= 100, year 2011= 120, year 2012= 140, year 2013= 210), which of the following is the simple moving average forecast for year 2014?

142.5

Given a prior forecast demand value of 230, a related actual demand value of 250, and a smoothing constant alpha of .1, what is the exponential smoothing forecast value for the following period?

232 230 + .1 x (250-230) = 232

If a firm produced a standard item with relatively stable demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecast model would tend to be in which of the following ranges?

5 to 10 percent

A company has calculated its running sum of forecast errors to be 500, and its mean absolute deviation is exactly 35. Which of the following is the company's tracking signal?

500/35 = 14.29

Which of the following forecasting methods is very dependent on selection of the right individuals who will judgmentally be used to actually generate the forecast?

Delphi method

Tracking Signal=

RSFE/MAD

Which of the following forecasting methods can be used for short-term forecasting?

Simple exponential smoothing

Heavy sales of umbrellas during a rain storm is an example of which of the following?

a casual relationship

Which of the following is a possible source of bias error in forecasting?

failing to include the right variables

Short-Term

less than 3 months

Which of the following forecasting methodologies is considered a casual forecasting technique?

linear regression

Which of the following forecasting methodologies is considered a qualitative forecasting technique?

market research

Which of the following is used to describe the degree of error?

mean absolute deviation

In general, which forecasting time frame best identifies seasonal effects?

medium-term forecasts

Which of the following forecasting methods uses executive judgment as its primary component for forecasting?

panel consensus

In most cases, demand for products or services can be broken down into several components. Which of the following is not considered a component of demand?

past data

Which of the following considerations is not a factor in deciding which forecasting model a firm should choose?

product

In general, which forecasting time frame compensates most effectively for random variation and short-term changes?

short-term forecasts

Which of the following forecasting methodologies is considered a time series forecasting technique?

simple moving average & weighted moving average

If a firm produced a product that was experiencing growth in demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be which of the following?

the more rapid the growth, the higher the percentage

The exponential smoothing method requires which of the following data to forecast the future?

the most recent forecast

Medium-Term

three months to two years

Long-Term

two years or longer

In time series data depicting demand, which of the following is not considered a component of demand variation?

variance

Linear Regression Model

y = mx + b