Demand Management & Forecasting Flashcards

Which type of demand is directly driven by the demand for a finished product and is derived from the bill of materials?

Answer: Dependent demand

Dependent demand is calculated from the parent item's demand using the BOM relationship, such as components needed to build a finished good.

A forecast with alpha = 0.9 in exponential smoothing will:

Answer: React very quickly to recent demand changes

A high alpha value (close to 1) places most weight on the most recent observation, making the forecast highly responsive to demand changes.

Which demand management technique involves offering discounts or promotions to shift demand from peak to off-peak periods?

Answer: Demand shaping

Demand shaping uses pricing, promotions, or incentives to actively influence the timing and volume of customer demand.

The forecast horizon should generally align with which planning parameter?

Answer: Cumulative lead time

The forecast horizon must cover at least the cumulative lead time so that procurement and production actions can be taken before demand occurs.

Which statistical method is best suited for forecasting a product with a strong linear upward trend but no seasonality?

Answer: Trend-adjusted exponential smoothing

Trend-adjusted exponential smoothing (Holt's method) accounts for both level and trend components, making it appropriate for trended non-seasonal data.

A product with high variability in demand and long lead times will require:

Answer: Higher safety stock

High demand variability combined with long lead times increases uncertainty, necessitating higher safety stock to maintain acceptable service levels.

Which of the following best describes 'forecast consumption' in demand management?

Answer: Replacing forecast demand with actual customer orders as they arrive

Forecast consumption is the process where actual customer orders progressively replace forecast quantities within the planning horizon.