CPIM Demand Management 4 — Questions and Answers
Question 1: In demand management, 'available-to-promise' (ATP) is calculated as:
- On-hand inventory plus all future production minus all future demand
- On-hand inventory plus scheduled receipts minus booked customer orders in each period (Correct answer)
- Total safety stock minus back orders
- Forecasted demand minus actual orders received
Correct answer: On-hand inventory plus scheduled receipts minus booked customer orders in each period
ATP represents the uncommitted portion of inventory in each period: on-hand plus scheduled receipts minus already-committed customer orders.
Question 2: Which of the following is an example of a demand shaping technique?
- Expediting a late supplier shipment
- Offering promotional pricing to shift demand from peak to off-peak periods (Correct answer)
- Adding a third production shift during peak season
- Increasing safety stock before a known demand spike
Correct answer: Offering promotional pricing to shift demand from peak to off-peak periods
Demand shaping involves using pricing, promotions, or incentives to actively influence when and how much customers buy, smoothing demand across time.
Question 3: The primary purpose of a Sales and Operations Planning (S&OP) process is to:
- Replace the master production schedule with a long-term plan
- Align supply capabilities with anticipated demand across the enterprise (Correct answer)
- Eliminate the need for detailed scheduling
- Determine individual customer delivery dates
Correct answer: Align supply capabilities with anticipated demand across the enterprise
S&OP aligns sales, marketing, operations, and finance around a single agreed-upon plan to balance supply capability with expected demand.
Question 4: A tracking signal that falls outside the control limits most likely indicates:
- Random forecast errors are within acceptable bounds
- A systematic bias has developed in the forecasting model (Correct answer)
- The smoothing constant is set too high
- Safety stock levels need immediate adjustment
Correct answer: A systematic bias has developed in the forecasting model
A tracking signal outside control limits signals that cumulative forecast errors are trending in one direction, indicating a systematic bias in the model.
Question 5: Which forecasting approach aggregates demand at a higher level (e.g., product family) and then disaggregates to individual SKUs?
- Bottom-up forecasting
- Top-down forecasting (Correct answer)
- Causal forecasting
- Collaborative forecasting
Correct answer: Top-down forecasting
Top-down forecasting starts at an aggregate level where data is more stable, then applies percentage splits or other rules to allocate demand to individual SKUs.
Question 6: In the context of demand management, 'lead time demand' refers to:
- The time required to generate a forecast
- The expected demand during the replenishment lead time (Correct answer)
- Customer order lead time expressed in units
- The lag between a promotion and its demand impact
Correct answer: The expected demand during the replenishment lead time
Lead time demand is the expected quantity of demand that will occur during the supplier or production lead time, used to set reorder points.
Question 7: A company wants to reduce forecast error for a high-volume, stable product. The BEST action is to:
- Shorten the forecast horizon (Correct answer)
- Increase the number of SKUs in the product line
- Switch to a Delphi qualitative method
- Increase the planning time fence
Correct answer: Shorten the forecast horizon
Shorter forecast horizons generally produce more accurate forecasts because there is less time for conditions to change from the forecast period.
CPIM Demand Management 4
In demand management, 'available-to-promise' (ATP) is calculated as: