CPIM Demand Management and Forecasting

Question 1

Which forecasting method uses the average of a specific number of the most recent historical periods?

Accepted Answer

Simple moving average

Answer

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?

Accepted Answer

A forecasting method that weights recent data more heavily; alpha controls how quickly old data is discounted

Answer

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?

Accepted Answer

The average absolute error between forecast and actual demand

Answer

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?

Accepted Answer

Delphi method

Answer

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?

Accepted Answer

A consistent tendency to over- or under-forecast, leading to systematic inventory or service errors

Answer

Forecast bias occurs when errors are consistently in one direction, causing systematic over- or understocking that does not self-correct.

CPIM - Certified in Production and Inventory Management Practice Test