Chapter 12

Question 1

Demand Planning

Answer 1

the combined process of forecasting and managing customer demands to create a planned pattern of demand that meets the firm’s operational and financial goals

Question 2

Demand Forecasting

Answer 2

a decision process in which managers predict demand patterns

Question 3

Demand Management

Answer 3

a proactive approach in which managers attempt to influence the pattern of demand

Question 4

Cost of Overestimating Demand (3)

Answer 4

holding costs
excess inventory costs
wages

Question 5

Cost of Underestimating Demand (3)

Answer 5

lost sales
lower product availability
lost goodwill

Question 6

Information Sources for Forecasting (3)

Answer 6

historical demand figures
business and economic metrics
management judgement

Question 7

Components of Demand Management (3)

Answer 7

Pricing
Promotion
Order Scheduling

Question 8

Patterns of Demand (4)

Answer 8

Stable
Seasonality, or Cycles
Trend
Shift, or Step

Question 9

Autocorrelation

Answer 9

the correlation of current demand values with demand values

Question 10

Forecast Error

Answer 10

the difference between a forecast and the actual demand

Question 11

Five Steps in Forecasting Process

Answer 11

1. Define Users and Processes
2. Identify Data Sources
3. Select Forecasting Techniques
4. Document Techniques
5. Monitor and Improve the Process

Question 12

Grassroots Forecasting

Answer 12

a technique that seeks inputs from people who are in close contact with customers and products

Question 13

Delphi Method

Answer 13

forecasts developed by asking a panel of experts to individually and repeatedly respond to a series of questions

Question 14

Time Series Analysis Models

Answer 14

forecasting models that compute forecasts using historical data arranged in the order of occurrence

Question 15

Naive Model

Answer 15

a simple forecasting approach that assumes that recent history is a good predictor of the near future

Question 16

Weighted Moving Average

Answer 16

a forecasting model that assigns a different weight to each period’s demand according to its importance

Question 17

Exponential Smoothing Model =

Answer 17

Ft+1 = Ft + alpha (dt - Ft)

Question 18

Exponential Smoothing (def.)

Answer 18

a moving average approach that applied exponentially decreasing weights to each demand that occurred farther back in time

Question 19

Regression Analysis

Answer 19

a mathematical approach for fitting an equation to a set of data

Question 20

Seasonal Index

Answer 20

an adjustment factor applied to forecasts to account for seasonal changes or cycles in demand

Question 21

Simulation Models

Answer 21

sophisticated mathematical programs that offer forecasters the ability to evaluate different business scenarios that might yield different demand outcomes

Question 22

Focused Forecasting

Answer 22

a combination of common sense inputs from frontline personnel and a computer simulation process

Question 23

Forecast Bias

Answer 23

the tendency of a forecasting technique to continually over predict or under-predict demand.

Question 24

Mean Percent Error (MPE)

Answer 24

average error represented as a percentage of demand

Question 25

Tracking Signal

Answer 25

the ratio of a running total of forecast error to MAD that indicates when the pattern of forecast error is changing significantly

Question 26

Adaptive Forecasting

Answer 26

a technique that automatically adjusts forecast model parameters in accordance with changes in the tracking signal

Question 27

Three “Rules” of Situational Forecasting

Answer 27

1. Short-term more accurate than long-term
2. Aggregate demand more accurate than isolated
3. Multiple sources of data more accurate

Question 28

Three Tactics of Demand Management

Answer 28

1. Pricing changes, promotions, etc.
2. Manage timing of order fulfillment
3. Substitution of products, providers

Question 29

Postponable Product

Answer 29

product designed so that it can be quickly configured to its final form quickly and inexpensively once actual customer demand is known

Question 30

Collaborative Planning, Forecasting, and Replenishment (CPFR)

Answer 30

a method by which supply chain partners periodically share forecasts, demand plans, and resource plans in order to reduce uncertainty and risk in meeting customer demand