Demand Management and Forecasting Flashcards

What is the difference between 'dependent demand' and 'independent demand'?

Answer: Dependent demand is derived from the demand for a parent item; independent demand comes directly from customers

Independent demand comes directly from end customers and must be forecasted; dependent demand is calculated from parent-item production plans using the BOM.

Which statistical measure indicates the percentage of time actual demand falls within the forecast range?

Answer: Forecast confidence interval (or service level)

A forecast confidence interval specifies the range within which actual demand is expected to fall a given percentage of the time.

What is 'causal forecasting' based on?

Answer: Using a leading indicator or external variable that correlates with and predicts demand

Causal forecasting builds a statistical model relating demand to one or more external variables (e.g., economic indicators, advertising spend) that predict demand.

What does a 'demand plan' integrate that a simple statistical forecast does not?

Answer: Business intelligence such as promotions, new product launches, and market events

A demand plan incorporates marketing events, promotions, product launches, and market intelligence in addition to statistical baseline forecasts.

In forecasting, what does 'disaggregation' refer to?

Answer: Breaking a high-level aggregate forecast down into individual SKU or location-level forecasts

Disaggregation splits an aggregate (family-level or regional) forecast into detailed forecasts by SKU, location, or customer segment.

What is 'new product forecasting' most challenging because of?

Answer: The absence of historical demand data for the new item

New product forecasting is challenging because there is no historical sales data, requiring market research, analogous product analysis, or expert judgment.