Sec 2 - Demand Management

Question 1

What are the 4Ps of Marketing Mix?

Answer 1

Product, Price, Promotion, Place

Question 2

What are Product marketing decision examples?

Answer 2

Design, quality, cost, flexibility, features, variety, sizes, brand name, return, service, warranty policies, etc

Question 3

What are Price marketing decision examples?

Answer 3

Commodity or premium price, market penetration price, loss leader, discounts, credit terms, allowances, etc

Question 4

What are Promotion marketing decision examples?

Answer 4

Sales promotions, advertising, campaigns, and public relations, etc

Question 5

What are Place marketing decision examples?

Answer 5

Sales channels, delivery mode/speed/dependability/flexibility, distribution inventory policy, etc

Question 6

What is an Order Qualifier?

Answer 6

Characteristics the product/service must have to be a viable competitor in the marketplace

Question 7

What is an Order Winner?

Answer 7

Characteristics that cause customers to chose a product over competitor’s products

Question 8

What is the Voice of the Customer?

Answer 8

Actual customer descriptions in words for the functions an features customers desire for goods and services

Question 9

Define Customer Relationship Management (CRM)

Answer 9

Collection and analysis of information designed for sales and marketing decision support.

To understand and support existing and potential customer needs.

Includes account management, catalog and order entry, payment processing, credit and adjustments, and other functions

Question 10

What is Demand Planning?

Answer 10

Process of combining statistical forecasting techniques and judgment to construct demand estimates for products from the supplier’s raw materials to the consumer’s needs

Question 11

What is Independent Demand

Answer 11

the demand for an item that is unrelated to the demand for other items

Question 12

What is Dependent Demand

Answer 12

Demand that is directly related to or derived form the bill of materials (BOM) of other items or end products. Demand is calculated and does not need to be forecasted

Question 13

What are 5 common sources of demand?

Answer 13

Forecast
customer orders
replenishment orders (from distribution centers)
Interplant transfers
Other (i.e. marketing or promotion samples)

Question 14

What are the 4 basic demand patterns?

Answer 14

Trend, Seasonal, Random, Cyclical

Question 15

What is Stable Demand? What is Dynamic Demand?

Answer 15

Stable demand patterns retain their general shape over time and are easier to forecast.

Dynamic are less predictable and make forecasting difficult.

Question 16

What are the 4 major principles of Forecasting?

Answer 16

1) Forecasts are rarely ever 100% accurate
2) Every forecast must include an estimate of error
3) Forecasts are more accurate for families/groups of products
4) Forecasts are more accurate in the short term

Question 17

What are the 3 major principles of data collection/preparation?

Answer 17

1) Record data in the terms needed for the forecast
2) Record the circumstances relating to the data
3) Record demand separately for different customer groups

Question 18

Define Qualitative forecasting techniques?

Answer 18

Based on intuition and informed opinion. Subjective.

Question 19

Define Quantitative forecasting techniques?

Answer 19

Extrinsic. Based on the idea of correlation and on cause/effect. Rely on external indicators to make the projections/forecast.

I.E. Housing starts influence the forecast of appliance, carpeting, etc

Question 20

What are the 2 main indicating groups for Quantitative demand forecasting?

Answer 20

Economic– i.e. housing starts, military contracts, commercial aircraft orders

Demographic– i.e. changes in birth rate, age distribution, income/education levels, ethnicity

Question 21

What 2 principles are used for Moving-Average Forecasts?

Answer 21

1) Demand is stable with little trend or seasonality

2) Past demand fluctuations are due to random variation

Question 22

What is the logic behind Moving-Average Forecasts?

Answer 22

The average demand from the past 3 to 6 months is used to forecast demand for the next month.

Question 23

What is the logic behind Exponential Smoothing?

Answer 23

1) Take the old forecast and the demand for the most recent period.
2) Assign a weighting factor (smoothing constant) to the last period’s demand
3) Calculate the weighted average of the old forecast and the latest demand

Question 24

What is the formula for the Exponential Smoothing?

Answer 24

New forecast = weighting factor X latest demand + (1 - weighting factor) X previous forecast

Question 25

How to select a smoothing constant?

Answer 25

Requires analysis of demand patterns and judgment. A low value gives more weight to the old forecast.

Question 26

How to forecast for a Seasonal demand pattern?

Answer 26

1) Calculate a seasonal index of demand for each period.
2) Develop de-seasonalized demand by developing forecast for and entire year and divide it by the number of periods being forecasted.
3) For each period multiply the de-seasonalized demand by that period’s seasonal index.

Question 27

What is the formula for a Seasonal Index?

Answer 27

period average demand / average demand for all periods

Question 28

What is the formula for deseasonalized demand?

Answer 28

annual forecast / number of periods

Question 29

What is the formula for the Seasonal forecast?

Answer 29

Expected period demand = seasonal index X deseasonalized forecast demand

Question 30

Define Forecast Bias

Answer 30

Consistent deviation from the mean in one direction (high or low).

Question 31

Define Mean Absolute Deviation (MAD)

Answer 31

The average of the absolute values of the deviations of observed values from some expected value

Question 32

What is the formula for Forecast Error?

Answer 32

actual period demand - forecasted period demand

Question 33

What is the formula for Mean Absolute Deviation (MAD)?

Answer 33

Total forecast error for all periods / number of periods