Demand Planning & Forecasting Flashcards

New product forecasting is particularly challenging because:

Answer: There is no historical sales data to use as a baseline

Without a sales history, new product forecasts must rely on analogous products, market research, or management judgment, making accuracy inherently lower.

A seasonal index value of 1.25 for a particular month indicates that demand in that month is expected to be:

Answer: 25% above the average monthly demand

A seasonal index above 1.0 means demand exceeds the monthly average; 1.25 means it is 25% higher than the baseline average.

Which metric measures the percentage of customer orders that are shipped complete and on time from available inventory?

Answer: Order fill rate

Order fill rate tracks what share of orders are fulfilled entirely and on schedule, directly reflecting demand planning and inventory effectiveness.

Demand sensing uses which type of data to generate short-term, highly accurate near-term forecasts?

Answer: High-frequency point-of-sale and shipment data

Demand sensing analyzes daily or weekly granular POS and shipment signals to refine forecasts for the immediate 1–4 week horizon.

Which type of demand is derived from the production requirements of a parent product rather than direct customer orders?

Answer: Dependent demand

Dependent demand for components is calculated directly from the production plan for the finished goods that contain them, as used in Material Requirements Planning (MRP).

A demand plan that is consistently higher than actual sales is said to have:

Answer: Positive forecast bias

Positive bias means the forecast systematically overstates demand, which can lead to excess inventory and increased carrying costs.