CPIM Demand Management and Forecasting 1 — Questions and Answers
Question 1: Which forecasting method uses the average of a specific number of the most recent historical periods?
- Simple moving average (Correct answer)
- Exponential smoothing
- Regression analysis
- Delphi method
Correct answer: Simple moving average
A simple moving average calculates the mean of the most recent N data points, dropping the oldest period as a new one is added.
Question 2: What is 'exponential smoothing' and what is the smoothing constant (alpha) used for?
- A forecasting method that weights recent data more heavily; alpha controls how quickly old data is discounted (Correct answer)
- A technique for smoothing out manufacturing defects
- A process for leveling production workloads
- A method for averaging supplier prices
Correct answer: A forecasting method that weights recent data more heavily; alpha controls how quickly old data is discounted
Exponential smoothing weights recent observations more heavily than older ones, with a higher alpha giving more weight to the most recent data.
Question 3: What does 'mean absolute deviation' (MAD) measure in forecasting?
- The average absolute error between forecast and actual demand (Correct answer)
- The maximum forecast error in a period
- The percentage by which forecast exceeds actual demand
- The standard deviation of safety stock
Correct answer: The average absolute error between forecast and actual demand
MAD is the average of the absolute differences between forecast values and actual demand, used to measure forecast accuracy.
Question 4: Which forecasting technique relies on expert opinion and consensus rather than historical data?
- Delphi method (Correct answer)
- Simple moving average
- Linear regression
- Seasonal index
Correct answer: Delphi method
The Delphi method gathers and iteratively refines expert opinions until a consensus forecast is reached, useful when historical data is unavailable.
Question 5: What is 'forecast bias' and why is it a concern?
- A consistent tendency to over- or under-forecast, leading to systematic inventory or service errors (Correct answer)
- Random forecasting errors that cancel out over time
- A measure of forecast speed
- A supplier's delivery variability
Correct answer: A consistent tendency to over- or under-forecast, leading to systematic inventory or service errors
Forecast bias occurs when errors are consistently in one direction, causing systematic over- or understocking that does not self-correct.
Question 6: What is a 'seasonal index' used for in demand forecasting?
- To adjust historical demand data to account for predictable seasonal patterns (Correct answer)
- To rank suppliers by seasonal performance
- To set safety stock levels in winter months
- To calculate the economic order quantity
Correct answer: To adjust historical demand data to account for predictable seasonal patterns
A seasonal index quantifies how much demand in a given period typically deviates from the average, used to deseasonalize data or forecast seasonal peaks.
CPIM Demand Management and Forecasting 1
Which forecasting method uses the average of a specific number of the most recent historical periods?