CPIM Demand Management & Forecasting 3 — Questions and Answers
Question 1: Which type of demand is directly driven by the demand for a finished product and is derived from the bill of materials?
- Independent demand
- Dependent demand (Correct answer)
- Lumpy demand
- Erratic demand
Correct answer: Dependent demand
Dependent demand is calculated from the parent item's demand using the BOM relationship, such as components needed to build a finished good.
Question 2: A forecast with alpha = 0.9 in exponential smoothing will:
- Heavily smooth out short-term fluctuations
- React slowly to demand changes
- React very quickly to recent demand changes (Correct answer)
- Give equal weight to all past periods
Correct answer: React very quickly to recent demand changes
A high alpha value (close to 1) places most weight on the most recent observation, making the forecast highly responsive to demand changes.
Question 3: Which demand management technique involves offering discounts or promotions to shift demand from peak to off-peak periods?
- Demand sensing
- Demand shaping (Correct answer)
- Demand disaggregation
- Demand aggregation
Correct answer: Demand shaping
Demand shaping uses pricing, promotions, or incentives to actively influence the timing and volume of customer demand.
Question 4: The forecast horizon should generally align with which planning parameter?
- Order cycle time
- Cumulative lead time (Correct answer)
- Safety stock level
- Reorder point
Correct answer: Cumulative lead time
The forecast horizon must cover at least the cumulative lead time so that procurement and production actions can be taken before demand occurs.
Question 5: Which statistical method is best suited for forecasting a product with a strong linear upward trend but no seasonality?
- Simple moving average
- Seasonal decomposition
- Trend-adjusted exponential smoothing (Correct answer)
- Naive forecast
Correct answer: Trend-adjusted exponential smoothing
Trend-adjusted exponential smoothing (Holt's method) accounts for both level and trend components, making it appropriate for trended non-seasonal data.
Question 6: A product with high variability in demand and long lead times will require:
- Lower safety stock
- Higher safety stock (Correct answer)
- No safety stock
- Only cycle stock
Correct answer: Higher safety stock
High demand variability combined with long lead times increases uncertainty, necessitating higher safety stock to maintain acceptable service levels.
Question 7: Which of the following best describes 'forecast consumption' in demand management?
- Using old forecasts to replace new ones
- Replacing forecast demand with actual customer orders as they arrive (Correct answer)
- Consuming physical inventory based on forecasts
- Deleting forecast data after each period
Correct answer: Replacing forecast demand with actual customer orders as they arrive
Forecast consumption is the process where actual customer orders progressively replace forecast quantities within the planning horizon.
CPIM Demand Management & Forecasting 3
Which type of demand is directly driven by the demand for a finished product and is derived from the bill of materials?