Exam 2 - Demand Planning

Question 1

Demand forecasting

Answer 1

Predicting the future customer demand

Question 2

Demand management

Answer 2

Influencing either pattern or consistency of demand

ex. Promotions, advertising

Question 3

Demand planning

Answer 3

Both forecasting and managing customer demand to reach operational and financial goals

Question 4

Strategic Planning

Answer 4

Long term
1-5 Years

Sources of supply
Open/close facilities
Transportation

Question 5

Tactical Planning

Answer 5

Medium term
6-18 months

Aggregate plans
Workforce plans
New product launches

Question 6

Operational planning

Answer 6

Short term
1-12 weeks

Daily production
Purchase orders

Question 7

How can companies manage demand?

Answer 7

• Use pricing, promotions or incentives to influence timing or quantity of demand (Triple Star days @ Starbucks)
• Manage timing of order fulfillment
• Encourage shifting to alternate products

Question 8

Putting together the right team

Answer 8

• Diversity of opinion
• Independence
• Decentralization

Question 9

Forecasting Process Steps

Answer 9

1. Identify users and decision-making processes
2. Identify likely sources of the best data inputs
3. Select forecasting techniques that will most effectively transform data into timely, accurate forecasts
4. Document and apply the proposed technique to the data gather for process
5. Monitor the performance of the process for improvement

Question 10

Qualitative

Answer 10

Non-numerical estimation techniques

• Lack the rigor of quantitative techniques, but are not necessarily any less accurate
• Harder to defend/justify

New products, new markets
Have a “feel”

Question 11

Quantitative

Answer 11

Number/stat based analysis

• Casual methods - Linear regressions
• Time series - Avgs, trends, seaonal
• Value of #s? Limitation of #s?

Question 12

Grassroots

Answer 12

Input from those close to products or customers

Ex. Front line workers, waiters

• Can only see part of the picture
• Recency bias

Question 13

Executive judgement

Answer 13

Input form those with experience and higher-level managers

• Access to more sources of info
• Better for high-level decisions not necessarily day-to-day stuff

Question 14

Historical Analogy

Answer 14

Use data from similar, past products as predictor

• Assume past demand is good predictors of future demand
• Good way to determine likely business cycles

Question 15

Marketing Research

Answer 15

Bases forecasts on patterns and attitude of current consumers

• Focus groups/demographics

Question 16

Delphi Method

Answer 16

Input for panel of experts

• Can revisit answers
• “High council”

Question 17

Time Series Analysis

Answer 17

Uses historical data arranged in order of occurrence

Question 18

Casual Studies

Answer 18

Search for cause and effect relationships among variables

• Key indicators

Question 18

Simulation models

Answer 18

Create representations of previous events to evaluate future outcomes

Question 19

Simple moving average forecasting

Answer 19

Items with relatively stable patterns

Ex. Diapers

Question 20

Weighted moving average forecasting

Answer 20

Seasonal items

Ex. Skis

Question 21

Moving average

Answer 21

Simple average of demand from some number of past periods

Question 22

Weighted moving average

Answer 22

Assigns different weights to each period’s demand based upon its importance

• Sum of weights should equal 1.00
• More recent periods carry more weight

Question 23

Exponential smoothing

Answer 23

A moving average approach that put less weight on further back in time data

Question 24

Smoothing coefficient

Answer 24

Weight given to most recent demand

Question 25

Forecast Accuracy

Answer 25

measure of how closely forecast aligns with demand

Question 26

Bias

Answer 26

tendency to over or under predict future demand (forecast error)

Question 27

Mean absolute deviation (MAD)

Answer 27

Average of forecast errors, irrespective of direction