CIM Demand Forecasting & Supply Planning 2 — Questions and Answers
Question 1: Which forecasting method assigns greater weight to more recent data points using a smoothing constant (α)?
- Simple moving average
- Exponential smoothing (Correct answer)
- Linear regression
- Naive forecasting
Correct 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.
Question 2: A company's demand shows a consistent upward trend over 12 months. Which forecasting technique is BEST suited for this pattern?
- Simple exponential smoothing
- Double exponential smoothing (Holt's method) (Correct answer)
- Naive method
- Weighted moving average
Correct 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.
Question 3: Mean Absolute Percentage Error (MAPE) is calculated as:
- Average of (Actual - Forecast)
- Average of |Actual - Forecast| / Actual × 100 (Correct answer)
- Sum of (Forecast - Actual)² / n
- Average of |Actual - Forecast|
Correct 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.
Question 4: In supply planning, 'safety stock' is primarily used to:
- Reduce ordering costs
- Buffer against demand and lead time variability (Correct answer)
- Maximize inventory turnover
- Decrease carrying costs
Correct answer: Buffer against demand and lead time variability
Safety stock protects against stockouts caused by variability in customer demand or supplier lead times.
Question 5: Which of the following is a qualitative forecasting method?
- Time series decomposition
- Delphi method (Correct answer)
- ARIMA modeling
- Exponential smoothing
Correct answer: Delphi method
The Delphi method is a qualitative technique that uses structured expert opinions through iterative rounds to reach a consensus forecast.
Question 6: A forecast bias that is consistently positive (forecast > actual) indicates:
- Random forecast error
- The forecast is systematically over-predicting demand (Correct answer)
- High forecast accuracy
- The forecast is systematically under-predicting demand
Correct 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.
Question 7: The 'bullwhip effect' in supply chains refers to:
- Demand being perfectly transmitted upstream
- Demand variability amplifying as it moves upstream in the supply chain (Correct answer)
- Suppliers holding too little safety stock
- Seasonal demand patterns in retail
Correct 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.
CIM Demand Forecasting & Supply Planning 2
Which forecasting method assigns greater weight to more recent data points using a smoothing constant (α)?