CDPP Demand Forecasting Methods — Questions and Answers
Question 1: What is the difference between qualitative and quantitative demand forecasting?
- Qualitative uses expert judgment and opinions; quantitative uses mathematical models and historical data (Correct answer)
- They are identical methods
- Qualitative is always more accurate
- Quantitative only works for new products
Correct answer: Qualitative uses expert judgment and opinions; quantitative uses mathematical models and historical data
Qualitative methods (Delphi, market research, executive opinion) rely on expert judgment for situations with limited data, while quantitative methods (time series, regression) use mathematical analysis of historical data.
Question 2: What is a moving average in demand forecasting?
- A calculation that averages demand over a fixed number of recent periods to smooth out fluctuations (Correct answer)
- A physical movement of inventory between warehouses
- An average of the distances goods travel during distribution
- A method for tracking vehicle movements in logistics
Correct answer: A calculation that averages demand over a fixed number of recent periods to smooth out fluctuations
A moving average calculates the mean of demand data over a specified number of recent periods (e.g., 3-month or 12-month), smoothing out random variation to reveal underlying trends.
Question 3: What is exponential smoothing?
- A forecasting method that applies exponentially decreasing weights to older observations (Correct answer)
- A manufacturing process for creating smooth product surfaces
- A data visualization technique for making curves smoother
- A customer satisfaction scoring method
Correct answer: A forecasting method that applies exponentially decreasing weights to older observations
Exponential smoothing assigns exponentially decreasing weights to past observations, giving more importance to recent data while still considering historical patterns.
Question 4: What is the Mean Absolute Percentage Error (MAPE)?
- A forecast accuracy metric calculated as the average of absolute percentage errors (Correct answer)
- A map of error-prone warehouse areas
- A maintenance and preventive error program
- A manufacturing accuracy performance evaluation
Correct answer: A forecast accuracy metric calculated as the average of absolute percentage errors
MAPE measures forecast accuracy as the average of absolute percentage differences between actual and forecasted values, providing an easily interpretable accuracy metric.
Question 5: What is collaborative forecasting (CPFR)?
- A process where trading partners share data and jointly develop demand forecasts (Correct answer)
- A group brainstorming session about future trends
- A computer program that automatically creates forecasts
- A government program for forecasting crop production
Correct answer: A process where trading partners share data and jointly develop demand forecasts
Collaborative Planning, Forecasting, and Replenishment (CPFR) is a practice where supply chain partners share information and collaboratively develop demand forecasts to improve accuracy.
Question 6: What is forecast bias and why is it problematic?
- A systematic tendency to consistently over- or under-forecast demand, causing inventory imbalances (Correct answer)
- A preference for one forecasting method over another
- A cognitive bias that affects investor decisions
- A calibration error in forecasting software
Correct answer: A systematic tendency to consistently over- or under-forecast demand, causing inventory imbalances
Forecast bias indicates a systematic error pattern — consistently forecasting too high leads to excess inventory, while too low causes stockouts. Identifying and correcting bias is critical.
CDPP Demand Forecasting Methods
What is the difference between qualitative and quantitative demand forecasting?