CDPP Supply Chain Integration — Questions and Answers
Question 1: What is the relationship between demand planning and supply chain management?
- Demand planning drives supply chain decisions including procurement, production, inventory, and distribution (Correct answer)
- They are completely unrelated functions
- Supply chain has no impact on demand planning
- Demand planning only affects marketing activities
Correct answer: Demand planning drives supply chain decisions including procurement, production, inventory, and distribution
Demand planning is the foundation of supply chain planning — the demand forecast drives purchasing decisions, production scheduling, inventory policies, and distribution planning.
Question 2: What is lead time and why is it important in demand planning?
- The time between ordering and receiving goods, which affects how far ahead demand must be forecasted (Correct answer)
- The time it takes to walk from one end of a warehouse to another
- The time a leader spends planning meetings
- Only relevant for online retail orders
Correct answer: The time between ordering and receiving goods, which affects how far ahead demand must be forecasted
Lead time directly determines how far in advance demand must be forecasted — longer lead times require longer forecast horizons, which typically means less accuracy.
Question 3: What is demand variability and how is it measured?
- The degree of fluctuation in demand over time, measured by standard deviation or coefficient of variation (Correct answer)
- The variety of products demanded by customers
- The variability of demand planning software features
- Only seasonal demand changes
Correct answer: The degree of fluctuation in demand over time, measured by standard deviation or coefficient of variation
Demand variability quantifies how much demand fluctuates around its average, measured by standard deviation or coefficient of variation, directly impacting safety stock requirements and service levels.
Question 4: What is the role of demand planning in inventory optimization?
- It provides the demand forecast that determines optimal inventory levels, reorder points, and safety stock quantities (Correct answer)
- Demand planning has no connection to inventory decisions
- Only the warehouse manager determines inventory levels
- Inventory optimization is done independently of demand forecasts
Correct answer: It provides the demand forecast that determines optimal inventory levels, reorder points, and safety stock quantities
Accurate demand forecasts enable precise safety stock calculations, optimal reorder points, and appropriate inventory levels that balance service with investment.
Question 5: What is postponement strategy and how does demand planning support it?
- Delaying final product configuration until demand signals are clearer, supported by accurate demand planning at the component level (Correct answer)
- Postponing demand planning meetings to a later date
- Delaying product launches indefinitely
- A strategy of always being late to market
Correct answer: Delaying final product configuration until demand signals are clearer, supported by accurate demand planning at the component level
Postponement delays final product differentiation until customer orders are received, reducing forecast error by forecasting at a more aggregate level where accuracy is higher.
Question 6: How does demand planning integrate with financial planning?
- Demand forecasts translate into revenue projections, COGS estimates, and inventory investment plans for financial budgets (Correct answer)
- Demand planning and finance never interact
- Only the CFO does demand planning
- Financial plans are created independently of demand forecasts
Correct answer: Demand forecasts translate into revenue projections, COGS estimates, and inventory investment plans for financial budgets
Demand plans drive financial planning by providing the volume and mix assumptions that determine revenue forecasts, cost of goods sold, working capital requirements, and profitability projections.
CDPP Supply Chain Integration
What is the relationship between demand planning and supply chain management?