Supply Chain Management Demand Planning 5 — Questions and Answers
Question 1: In demand planning, 'demand sensing' differs from traditional forecasting primarily because it:
- Uses longer historical windows for accuracy
- Leverages near-real-time signals like POS data to update short-term forecasts daily (Correct answer)
- Replaces statistical models with human judgment
- Focuses exclusively on new product introductions
Correct answer: Leverages near-real-time signals like POS data to update short-term forecasts daily
Demand sensing uses high-frequency downstream data (POS, shipment, consumption) to continuously refresh the near-term forecast, reducing latency versus monthly statistical runs.
Question 2: A company sells ice cream and experiences much higher demand during summer months. This pattern would be classified in decomposition as the:
- Trend component
- Cyclical component
- Seasonal component (Correct answer)
- Irregular component
Correct answer: Seasonal component
The seasonal component captures regular, calendar-driven fluctuations that repeat within a year, such as summer spikes for temperature-sensitive products.
Question 3: Which of the following best describes 'market intelligence' in demand planning?
- Statistical extrapolation of past sales
- Qualitative inputs from sales teams and market data that adjust the statistical forecast (Correct answer)
- Competitor pricing data used to set internal prices
- A real-time inventory visibility system
Correct answer: Qualitative inputs from sales teams and market data that adjust the statistical forecast
Market intelligence encompasses qualitative information — sales team insights, customer feedback, competitive activity — used to override or enrich statistical forecasts.
Question 4: A retailer provides its supplier with direct access to store-level inventory and sales data to improve replenishment. This arrangement is called:
- Drop shipping
- Vendor-Managed Inventory (VMI) (Correct answer)
- Cross-docking
- Consignment stocking
Correct answer: Vendor-Managed Inventory (VMI)
In VMI, the supplier uses the retailer's inventory and sales data to autonomously manage replenishment decisions, improving service while reducing the retailer's planning burden.
Question 5: When a company disaggregates a national-level demand forecast down to individual SKUs and distribution centers, this process is called:
- Top-down forecasting (Correct answer)
- Bottom-up forecasting
- Middle-out forecasting
- Proportional distribution
Correct answer: Top-down forecasting
Top-down forecasting starts with an aggregate forecast and distributes it to lower levels using historical proportion ratios or planned splits.
Question 6: Which situation would most likely cause a demand planner to apply a 'statistical outlier removal' before building a forecast?
- A product that launches in a new region
- A one-time bulk purchase by a customer that inflated a single month's sales (Correct answer)
- A consistent trend of growing demand
- A product nearing end-of-life
Correct answer: A one-time bulk purchase by a customer that inflated a single month's sales
One-time events like exceptional bulk orders skew the historical average and should be cleaned from the data to prevent distorting the baseline forecast.
Question 7: Which forecasting method is most appropriate for a product in the mature phase of its lifecycle with stable, low-variability demand?
- Exponential smoothing with a high alpha
- Simple moving average (Correct answer)
- Analog product forecasting
- Regression-based causal model
Correct answer: Simple moving average
Simple moving average works well for stable, predictable demand because it smooths random noise without overreacting to individual data points.
Supply Chain Management Demand Planning 5
In demand planning, 'demand sensing' differs from traditional forecasting primarily because it: