Chapter 3: Demand Forecasting Flashcards
Q: Why is demand forecasting important?
A: It is critical for business decisions like inventory, staffing, and production.
Q: What is the goal of demand forecasting?
A: To generate forecasts that are, on average, accurate with low error.
Q: What are short-term forecasts used for?
A: Scheduling and operational planning.
Q: What are medium-term forecasts used for?
A: Tactical planning, such as budget management.
Q: What are long-term forecasts used for?
A: Strategic planning for new products or market expansions.
Q: Are forecasts usually perfect?
A: No, forecasts come with a margin of error.
Q: Are forecasts more accurate for groups or individuals?
A: More accurate for groups than for individual items.
Q: How does the time horizon affect forecast accuracy?
A: The shorter the time frame, the more accurate the forecast.
Q: What are judgmental forecasting methods?
A: Methods based on human intuition and experience, like executive opinions and sales force estimates.
Q: What are quantitative forecasting methods?
A: Methods that use mathematical models, such as time series and associative models.
Q: What is the first step in the forecasting process?
A: Determine the purpose of the forecast.
Q: What is the second step in the forecasting process?
A: Establish a forecasting horizon (short, medium, or long-term).
Q: What is the third step in the forecasting process?
A: Gather and analyze historical data.
Q: What is the fourth step in the forecasting process?
A: Select a forecasting model based on accuracy, cost, etc.
Q: What is the fifth step in the forecasting process?
A: Generate the forecast.
Q: What is the final step in the forecasting process?
A: Monitor the forecast’s accuracy and adjust if needed.
Q: What is a level pattern in time series models?
A: Data fluctuates around a constant mean.
Q: What does a trend in a time series model indicate?
A: An increasing or decreasing pattern over time.
Q: What is seasonality in time series models?
A: Regular patterns tied to time, like higher sales during holidays.
Q: What are cycles in time series models?
A: Long-term variations often tied to economic factors.
Q: What is a moving average?
A: A forecasting method that uses recent data points to predict future values.
Q: What is a weighted moving average?
A: A forecasting method that assigns different weights to past periods.
Q: What is exponential smoothing?
A: A forecasting technique that places more weight on recent data to predict future values.
Q: What does Mean Absolute Deviation (MAD) measure?
A: It measures average error in absolute terms.
Q: What does Mean Squared Error (MSE) emphasize?
A: Larger deviations by squaring the errors.
Q: What does Mean Absolute Percent Error (MAPE) measure?
A: Error as a percentage of actual values.
Q: What does positive bias in a forecast indicate?
A: Frequent underestimation.
Q: What does negative bias in a forecast indicate?
A: Frequent overestimation.
Q: What do associative models use to estimate a target variable?
A: Predictor variables, like economic indicators.
Q: What is linear regression in forecasting?
A: A technique to model the relationship between variables.
Q: What is executive opinion in judgmental models?
A: Relying on the knowledge of experienced executives for forecasting.
Q: What is the Delphi Method in judgmental forecasting?
A: A structured forecasting method using expert consensus through iterative questionnaires.
Q: What factors should be considered when choosing a forecasting technique?
A:
1. Cost and accuracy
2. Availability of historical data
3. Time horizon and data patterns
Q: What is a tracking signal used for?
A: To monitor forecast accuracy over time and detect bias.
Q: What are control charts used for in forecasting?
A: Visual tools that help identify when forecasts go out of control limits.
