Chapter 12. Demand Planning: Forecasting and Demand Management

Identify the members of the supply chain who are affected by a high forecast.

The firms that own the supply chain incur the expenses of high forecasting. The customers pay for it in the form of higher prices.

The ratio of each period's actual demand to an estimate of the average (or base) demand across all periods in a complete seasonal cycle is called a _____.

seasonal index

______ ______ are sophisticated mathematical programs that offer forecasters the ability to evaluate different business scenarios that might yield different demand outcomes.

simulation models

Identify the estimating technique used for adjusting for a trend using exponential smoothing?

Intense data collection and sophisticated mathematical modeling

Identify the sources of data for artificial intelligence.

Internet External data feeds Company sales and transaction systems

A scientific marine equipment manufacturing firm has a 36 month order-to-delivery (OTD) lead time. What is the minimum forecasting time required?

36 months

Identify the true statements about forecast bias and forecast accuracy.

A positive forecast bias indicates that over time forecasts tend to be too low. Forecast bias is the average forecast error over a number of period.

Which of the following scenarios are examples of the application of causal forecasting techniques?

A ski resort has increased occupancy when the snow base increases. Occupancy increases by 15% after a fresh snow fall. When a firm spends on advertising, sales increase. The more ads placed, the more sales increase.

Identify the users' characteristics and needs that have to be kept in mind when designing a forecasting process

Accuracy versus cost Fit with existing business processes Time horizon Level of detail

_____ is a technique that automatically adjusts forecast model parameters in accordance with changes in the tracking signal.

Adaptive forecasting

_____ describes the relationship of current demand with past demand.

Autocorrelation

How can you reduce lead time?

By eliminating unnecessary processes By speeding up processes which are redundant By speeding up poorly executed processes

Which of the following factors are influenced by business executives using demand management?

Certainty of demand Timing Pattern

Which of the following does focused forecasting combine?

Computer simulation process Common sense inputs from frontline personnel

_____ helps operations managers know what customers they should serve and at what levels of service?

Demand planning

The chairman of a company has an idea for a new product. Which of the following forecasting techniques can be used in this scenario?

Executive judgment

True or false: A linear trend results when demand rises or falls at a varying rate.

False

True or false: Demand planning is easy when products have highly varying and uncertain demand patterns.

False

True or false: In adaptive forecasting, the smoothing coefficients in exponential smoothing models are manually adjusted.

False

Identify the users' characteristics and needs that have to be kept in mind when designing a forecasting process.

Fit with existing business processes Level of detail Time horizon Accuracy versus cost

Which of the following does artificial intelligence combine?

Focused forecasting techniques Simulation Causal modeling Time series analysis

_____ is the measurement of how closely the forecast aligns with the observations over time.

Forecast accuracy

_____ activities integrate information gathered from the market, from internal operations, and from the larger business environment to make predictions about future demand.

Forecasting

Identify the true statements of demand management.

Forecasting is essentially a reactive approach that considers fluctuations in demand to be mostly outside the firm's control. Demand management is important when customers' demands fluctuate in an unpredictable way.

Which of the following parameters are considered to compute a sales forecast?

Fuel prices Sales from prior year Disposable personal income Base sales Advertising expenditures

Identify the definition of the moving average method.

It is a forecasting model that computes a forecast as the average of demands over a number of immediate past periods.

Identify the true statements about the tactics used by managers to manage demands.

It is possible to negotiate with customers regarding when they will take delivery of their products. Operations managers must understand customer requirements regarding acceptable lead times The ultimate goal of demand management is to match demand and operational capacity in order to attain the business's competitive objectives.

_____ is the average size of forecast errors, irrespective of their directions.

Mean absolute deviation

_____ is the mean absolute deviation represented as a percentage of demand.

Mean absolute percentage error

_____ is the average error represented as a percentage of demand.

Mean percent error

_____ is a more sensitive measure of forecast errors that approximates the error variance.

Mean squared error

Identify the costs incurred when making forecasts that are too low.

Money is lost in lost sale Money is lost in lower product availability for customers.

Identify the costs incurred when making forecasts that are too high.

Money is lost in paying wages to workers who are not required. Production capacity is lost in making products that no one is willing to buy. Money is lost in holding inventory that is never sold.

Which of the following values are used as indicators of future demand in causal models?

Observed data External factors Independent data

Identify the factors used in demand management.

Order scheduling Promotional plans Pricing strategy

Identify the possible sources of data when designing a forecast process.

Past sales Expert information Government economic information

Which of the following changes take place when the number of periods are increased?

Reduction of impact of random or atypical demands in isolated time periods Reduction of sensitivity of the moving average to actual shifts in demand.

Which of the following are a part of big data?

Sensor data Descriptive data Transaction data

Identify the statistical model based forecasting techniques that transform numerical data into forecasts.

Simulation models Causal studies Artificial intelligence Time series analysis

A firm has a new service idea, which has no current customers. The firm has no prior experience in this area. It wants to test the idea before committing the resources. The firm has resources to invest in two judgment forecasting techniques. Which of the following techniques will provide a rational forecast in this scenario?

The Delphi method Marketing research

Identify the true statements about situational drivers of forecast accuracy.

The random forces that affect demand for individual products tend to be inconsistent across all products. As the time horizon for forecasting increases, more and more potentially unknown factors can affect demand.

Identify the true statements about time series analysis models.

The weighting schemes range from very simple to very complex. Forecasts are generated by summing weighted values of past demands.

_____ is the ratio of a running total of forecast error to MAD that indicates when the pattern of forecast error is changing significantly.

Tracking signal

Seasonality can occur over a variety of time periods. Which of the following time periods are most likely to be used to forecast demand in operations?

Week Month Daily

______ ______ refers to the voluminous amount of information that are easily accessible through interconnected systems.

big data

When products are redesigned as postponable products, ______ rather than ______ ______inventory is stocked closer to customer demand.

component, finished goods

In the _____ approach, an exponentially smaller weight is applied to each demand that occurred farther back in time.

exponential smoothing

______ ______ is the unexplained component of demand that seems to be random in nature.

forecast error

A firm wants to launch a new line of consumer goods and has no historical information available for forecasting. The product has never been marketed and the firm wants to differentiate potential product demand by seeking inputs from people who are in close contact with customers and products. This technique is called _____.

grassroots forecasting

A forecasting process integrates information gathered from the market, from internal operations, and from the larger business environment to _____.

make predictions about future demand

A _____ is a forecasting approach that simply assumes that tomorrow's demand will be the same as today's.

naïve model

The keys to the _____ approach are redesign of the product and redistribution of production resources so that the products can be easily configured close to the source of demand.

postponable product

Forecasting is a _____.

process

It is a basic fact of forecasting that the longer the time period over which you have to forecast, _____.

the greater the forecast error