Demand Management and Forecasting Flashcards

A forecaster finds that the running sum of forecast errors divided by MAD has moved to +5.2. What does this tracking signal most likely indicate?

Answer: The forecast is consistently under-forecasting demand (bias)

A large positive tracking signal (actual minus forecast summed) shows persistent under-forecasting bias beyond typical control limits of about ±4.

Which type of demand should be calculated from the bill of material rather than forecast?

Answer: Subassemblies used in a company's own end items

Dependent demand for components and subassemblies is derived from the MPS and BOM, not forecast independently.

In exponential smoothing, raising the smoothing constant (alpha) from 0.1 to 0.5 will have what effect?

Answer: The forecast responds more quickly to recent demand changes

A higher alpha places more weight on the most recent actual demand, increasing responsiveness but also nervousness.

A company's sales team commits to customer orders using available-to-promise (ATP). What is the primary purpose of ATP in demand management?

Answer: To indicate the uncommitted portion of inventory and planned production for order promising

ATP shows uncommitted supply that can be promised to new customer orders without disrupting existing commitments.

Which forecasting method is most appropriate when launching a completely new product with no sales history?

Answer: Delphi method using expert panels

Qualitative methods like Delphi are suited when historical data does not exist.

Demand for a product rises in a predictable pattern every December and falls every February. This pattern is best described as:

Answer: Seasonality

Seasonality is a recurring pattern within a year tied to calendar periods.

Within the demand time fence, what generally drives the master schedule?

Answer: Actual customer orders

Inside the demand time fence, forecasts are typically ignored and customer orders drive the schedule.