CIM Demand Forecasting & Supply Planning 4 — Questions and Answers
Question 1: Which forecasting approach uses external indicators such as housing starts or GDP to predict future demand?
- Time series analysis
- Econometric/causal modeling (Correct answer)
- Seasonal decomposition
- Exponential smoothing
Correct answer: Econometric/causal modeling
Causal (econometric) models identify relationships between demand and external variables (leading indicators) to generate forecasts.
Question 2: In the context of supply planning, 'Available to Promise (ATP)' represents:
- Total inventory on hand
- Uncommitted inventory that can be promised to new customer orders (Correct answer)
- The reorder point for replenishment
- Maximum production capacity
Correct answer: Uncommitted inventory that can be promised to new customer orders
ATP is the portion of on-hand inventory and planned production not yet committed to customer orders, used to confirm delivery dates.
Question 3: Forecast error that follows a random pattern with no consistent over- or under-prediction is called:
- Systematic bias
- White noise / random error (Correct answer)
- Trend deviation
- Seasonal error
Correct answer: White noise / random error
Random (white noise) error has no pattern and averages to zero over time, indicating the forecasting model has captured all systematic components of demand.
Question 4: A company experiences demand spikes every December due to holiday shopping. This pattern is an example of:
- Cyclical variation
- Seasonal variation (Correct answer)
- Irregular variation
- Trend variation
Correct answer: Seasonal variation
Seasonal variation refers to regular, predictable demand fluctuations that repeat within a year, often tied to calendar events or weather.
Question 5: Which of the following metrics measures the average number of absolute forecast errors, expressed in original demand units?
- MAPE
- Bias
- MAD (Mean Absolute Deviation) (Correct answer)
- MSE (Mean Squared Error)
Correct answer: MAD (Mean Absolute Deviation)
MAD measures forecast accuracy by averaging the absolute values of forecast errors in the same units as the original demand data.
Question 6: Rough-Cut Capacity Planning (RCCP) is used in conjunction with which planning level?
- Material Requirements Planning (MRP)
- Master Production Schedule (MPS) (Correct answer)
- Shop floor scheduling
- Sales & Operations Planning (S&OP)
Correct answer: Master Production Schedule (MPS)
RCCP checks whether key resources (machines, labor) can support the MPS by performing a high-level capacity check against the master schedule.
Question 7: Which technique disaggregates an aggregate production plan into specific products, time periods, and production quantities?
- Rough-Cut Capacity Planning
- Master Production Scheduling (MPS) (Correct answer)
- Distribution Requirements Planning (DRP)
- Demand sensing
Correct answer: Master Production Scheduling (MPS)
The MPS translates the higher-level aggregate plan into specific item-level production quantities and timing across the planning horizon.
CIM Demand Forecasting & Supply Planning 4
Which forecasting approach uses external indicators such as housing starts or GDP to predict future demand?