Supply Chain Management Demand Planning 2 — Questions and Answers
Question 1: Which demand planning technique uses weighted averages where more recent data points are given greater importance?
- Simple moving average
- Exponential smoothing (Correct answer)
- Linear regression
- Seasonal decomposition
Correct answer: Exponential smoothing
Exponential smoothing assigns exponentially decreasing weights to older observations, making recent data more influential in the forecast.
Question 2: A company notices its product sells significantly more in December every year. This pattern is best classified as:
- Trend
- Cyclical variation
- Seasonal variation (Correct answer)
- Random variation
Correct answer: Seasonal variation
Seasonal variation refers to predictable, repeating fluctuations tied to calendar periods such as months or quarters.
Question 3: What is the primary purpose of a Demand Review in the Sales & Operations Planning (S&OP) process?
- To approve capital expenditures
- To reconcile unconstrained demand forecasts with financial targets (Correct answer)
- To schedule production runs
- To negotiate supplier contracts
Correct answer: To reconcile unconstrained demand forecasts with financial targets
The Demand Review step in S&OP aligns the statistical forecast with market intelligence and reconciles it against revenue and financial plans.
Question 4: In demand planning, 'intermittent demand' is characterized by:
- High volume with steady frequency
- Irregular transaction intervals with variable quantity (Correct answer)
- Predictable spikes during holidays
- Continuous low-level consumption
Correct answer: Irregular transaction intervals with variable quantity
Intermittent demand occurs when transactions happen sporadically with varying quantities, making it difficult to forecast with standard methods.
Question 5: Which metric measures the average absolute difference between forecasted and actual demand, expressed as a percentage?
- MAD
- MAPE (Correct answer)
- RMSE
- Bias
Correct answer: MAPE
Mean Absolute Percentage Error (MAPE) expresses forecast error as a percentage of actual values, allowing comparison across products with different scales.
Question 6: A demand planner discovers the forecast consistently underestimates actual sales over six months. This is known as:
- Random error
- Positive forecast bias (Correct answer)
- High MAPE
- Demand volatility
Correct answer: Positive forecast bias
Positive forecast bias means the forecast is systematically below actual demand, indicating a structural issue in the forecasting model or inputs.
Question 7: Which approach segments products by forecast accuracy and volume to tailor the planning strategy for each group?
- ABC analysis
- XYZ analysis
- ABC-XYZ matrix (Correct answer)
- Pareto segmentation
Correct answer: ABC-XYZ matrix
The ABC-XYZ matrix combines volume/value segmentation (ABC) with demand variability segmentation (XYZ) to guide differentiated planning strategies.
Supply Chain Management Demand Planning 2
Which demand planning technique uses weighted averages where more recent data points are given greater importance?