CDPP Demand Planning Metrics & Performance Management 2 — Questions and Answers
Question 1: What is a demand planning KPI dashboard primarily used for?
- Generating purchase orders automatically
- Monitoring forecast accuracy, bias, and process health to drive continuous improvement decisions (Correct answer)
- Calculating finished goods inventory valuation
- Setting sales quotas for the commercial team
Correct answer: Monitoring forecast accuracy, bias, and process health to drive continuous improvement decisions
A KPI dashboard gives demand planners and leadership visibility into forecast performance trends, enabling data-driven decisions about model adjustments and process improvements.
Question 2: What does 'forecast value add' (FVA) analysis measure?
- The revenue impact of accurate forecasts
- Whether each step in the forecasting process improves or worsens accuracy compared to a naive benchmark (Correct answer)
- The cost savings from reducing safety stock
- The number of SKUs improved by a new forecasting model
Correct answer: Whether each step in the forecasting process improves or worsens accuracy compared to a naive benchmark
FVA evaluates each forecasting stage—statistical baseline, market intelligence adjustments, management overrides—to identify which steps genuinely improve accuracy and which add noise.
Question 3: In FVA analysis, what does a negative FVA for management overrides indicate?
- Management adjustments improve forecast accuracy
- Management adjustments, on average, make the forecast less accurate than the statistical baseline (Correct answer)
- The statistical model is producing negative forecasts
- The override process is not being documented
Correct answer: Management adjustments, on average, make the forecast less accurate than the statistical baseline
Negative FVA means the adjusted forecast has higher error than the unadjusted statistical model, indicating that management overrides are introducing more noise than signal.
Question 4: What is the relationship between forecast accuracy and inventory carrying costs?
- Higher forecast accuracy always leads to higher inventory levels
- Improved forecast accuracy reduces the safety stock needed to achieve a target service level, lowering carrying costs (Correct answer)
- Forecast accuracy has no impact on inventory decisions
- Lower forecast accuracy requires less safety stock
Correct answer: Improved forecast accuracy reduces the safety stock needed to achieve a target service level, lowering carrying costs
Safety stock is sized to buffer forecast uncertainty, so reducing forecast error (lower standard deviation of errors) directly decreases the safety stock required for any given service level.
Question 5: What is 'service level' as a demand planning performance metric?
- The speed of customer service responses
- The percentage of customer orders filled completely from available stock (fill rate or cycle service level) (Correct answer)
- The average delivery lead time in days
- A measure of forecast accuracy
Correct answer: The percentage of customer orders filled completely from available stock (fill rate or cycle service level)
Service level in supply chain context typically refers to fill rate (percentage of demand met from stock) or cycle service level (percentage of replenishment cycles with no stockout).
Question 6: Which demand planning metric best captures the cost impact of forecast errors?
- MAPE
- Tracking signal
- Inventory days of supply (DOS) variance (Correct answer)
- Number of SKUs with outlier demand
Correct answer: Inventory days of supply (DOS) variance
Inventory days of supply variance quantifies whether the business is holding too much or too little stock relative to plan, directly linking forecast quality to working capital impact.
CDPP Demand Planning Metrics & Performance Management 2
What is a demand planning KPI dashboard primarily used for?