Demand Forecasting & Supply Planning Flashcards

Which forecasting method assigns greater weight to more recent data points using a smoothing constant (α)?

Answer: Exponential smoothing

Exponential smoothing uses a smoothing constant α (0 < α < 1) to give more weight to recent observations while exponentially decreasing the weight of older data.

A company's demand shows a consistent upward trend over 12 months. Which forecasting technique is BEST suited for this pattern?

Answer: Double exponential smoothing (Holt's method)

Double exponential smoothing (Holt's method) accounts for both level and trend components, making it appropriate for data with a consistent trend.

Mean Absolute Percentage Error (MAPE) is calculated as:

Answer: Average of |Actual - Forecast| / Actual × 100

MAPE measures forecast accuracy as a percentage by averaging the absolute differences between actual and forecast values divided by the actual values.

In supply planning, 'safety stock' is primarily used to:

Answer: Buffer against demand and lead time variability

Safety stock protects against stockouts caused by variability in customer demand or supplier lead times.

Which of the following is a qualitative forecasting method?

Answer: Delphi method

The Delphi method is a qualitative technique that uses structured expert opinions through iterative rounds to reach a consensus forecast.

A forecast bias that is consistently positive (forecast > actual) indicates:

Answer: The forecast is systematically over-predicting demand

A consistent positive bias means the forecasting model is chronically over-estimating demand, which leads to excess inventory.

The 'bullwhip effect' in supply chains refers to:

Answer: Demand variability amplifying as it moves upstream in the supply chain

The bullwhip effect describes how small fluctuations in consumer demand cause increasingly larger swings in orders at each upstream supply chain level.