CPIM Demand Management 5 — Questions and Answers
Question 1: Which of the following best describes the role of a 'time fence' in the master scheduling process?
- A limit on the number of customer orders accepted per period
- A boundary that controls how and when changes can be made to the MPS (Correct answer)
- A cut-off date for submitting supplier purchase orders
- A threshold for triggering safety stock replenishment
Correct answer: A boundary that controls how and when changes can be made to the MPS
Time fences define zones in the planning horizon where schedule changes are restricted or require authorization to maintain stability in production and purchasing.
Question 2: When using weighted moving averages, assigning higher weights to more recent periods results in:
- A smoother forecast that reacts slowly to demand changes
- A more responsive forecast that reacts quickly to recent demand changes (Correct answer)
- Reduced sensitivity to seasonal patterns
- Lower tracking signal volatility
Correct answer: A more responsive forecast that reacts quickly to recent demand changes
Higher weights on recent data make the forecast more responsive to current demand trends at the expense of potentially overreacting to random fluctuations.
Question 3: A company sells products to both retail consumers and to industrial buyers. Managing these two demand streams separately is important because:
- Industrial buyers always have lower demand variability than retail consumers
- Each channel may have different order patterns, lead time expectations, and pricing requirements (Correct answer)
- Retail demand is always more accurate to forecast than industrial demand
- Combining channels simplifies ATP calculations
Correct answer: Each channel may have different order patterns, lead time expectations, and pricing requirements
Different demand channels have distinct characteristics — order patterns, volumes, lead time needs, and pricing — and mixing them can obscure planning signals.
Question 4: Which of the following is the BEST indicator that a demand management process is performing well?
- No customer orders are ever rejected
- High forecast accuracy combined with high customer service levels (Correct answer)
- Safety stock levels are minimized to zero
- The forecast is never revised after initial publication
Correct answer: High forecast accuracy combined with high customer service levels
Effective demand management produces accurate forecasts that enable the company to meet customer service targets without excessive inventory.
Question 5: A manufacturer experiences large swings in orders from its distributor, even though end-consumer sales are relatively stable. To reduce this effect, the manufacturer should:
- Increase batch sizes to improve manufacturing efficiency
- Share point-of-sale data with the distributor and implement vendor-managed inventory (Correct answer)
- Reduce the number of SKUs in the product line
- Increase safety stock at the distributor level only
Correct answer: Share point-of-sale data with the distributor and implement vendor-managed inventory
Sharing POS data and using VMI aligns replenishment to actual consumption rather than ordering behavior, directly attacking the root cause of the bullwhip effect.
Question 6: In demand management, 'independent demand' differs from dependent demand in that it:
- Is always more predictable than dependent demand
- Is driven by external market forces rather than derived from a parent item's production plan (Correct answer)
- Applies only to finished goods in make-to-stock environments
- Is calculated automatically by the MRP system
Correct answer: Is driven by external market forces rather than derived from a parent item's production plan
Independent demand originates from customer orders or market forecasts and is not derived from any higher-level production requirement.
Question 7: A company's forecast for next month is 500 units, but actual demand comes in at 600 units. The forecast error is:
- -100 units (demand exceeded forecast) (Correct answer)
- 100 units (forecast exceeded demand)
- +100 units (demand exceeded forecast)
- -100 units (forecast exceeded demand)
Correct answer: -100 units (demand exceeded forecast)
Forecast error = Forecast – Actual = 500 – 600 = -100, indicating the forecast underestimated demand by 100 units.
CPIM Demand Management 5
Which of the following best describes the role of a 'time fence' in the master scheduling process?