demand forecasting

Question 1

demand forecasting

Answer 1

essential for initiating all operation activities, influencing cash flow, inventory, capacity design, production plans, staffing, purchasing, subcontracting, and transportation

Question 2

importance of demand forecasting

Answer 2

often underestimated; differs from sales forecasting, tool that informs inventory and operational strategies rather than an endpoint

Question 3

forecasting challanges

Answer 3

• Forecasts are inherently inaccurate; understanding the extent and direction of errors is crucial
• Future forecasts tend to have greater error margins

Question 4

over-forecasting

Answer 4

can lead to excessive inventory, high storage costs, losses on unsold products, obsolescence, and inefficient raw materials, and increased costs from subcontracting and overtime

Question 5

under-forecasting

Answer 5

can result In stock shortages, lost orders, poor customer relationships, production halts due to insufficient raw materials, and increased costs from subcontracting and overtime

Question 6

SKU management

Answer 6

consideration of whether consistent forecasting practises apply to all SKUs and how to prioritize them strategically is necessary

Question 7

annual monetary volume

Answer 7

(annual demand) x (unit cost)