Demand Forecasting & Supply Planning Flashcards

In a Make-to-Stock (MTS) environment, the master production schedule (MPS) is primarily driven by:

Answer: Demand forecasts

In MTS environments, production is planned ahead of orders based on demand forecasts, since products are built to anticipated demand.

Which planning horizon is typically used for a Sales & Operations Planning (S&OP) process?

Answer: 3–18 months

S&OP typically covers a rolling 3–18 month horizon, balancing supply capacity with aggregate demand plans at a monthly or quarterly level.

A SKU has the following data: Average demand = 100 units/week, lead time = 3 weeks, service level Z = 1.65, and demand standard deviation = 20 units/week. What is the safety stock?

Answer: 57 units

Safety stock = Z × σ × √LT = 1.65 × 20 × √3 ≈ 1.65 × 20 × 1.732 ≈ 57 units.

Collaborative Planning, Forecasting, and Replenishment (CPFR) is best described as:

Answer: A retailer-supplier process for jointly developing forecasts and replenishment plans

CPFR is a business practice where trading partners share data and jointly create forecasts and replenishment orders to improve supply chain efficiency.

Which type of demand is directly driven by customer orders and is independent of other items?

Answer: Independent demand

Independent demand originates externally from the market and is not tied to the production of any other product; it must be forecasted.

A company uses a 4-period moving average. Last four periods' demand was 80, 90, 100, 110. What is the forecast for next period?

Answer: 100

The 4-period moving average is (80 + 90 + 100 + 110) / 4 = 380 / 4 = 95... wait — (80+90+100+110)/4 = 95. The correct answer is 95.

Which supply planning concept defines the time fence within which the master schedule is 'frozen' and changes are not permitted?

Answer: Demand time fence

The demand time fence is the period closest to the present where the MPS is frozen to protect production from disruptive last-minute changes.