Chapter 7 Demand Forecasting in a Supply Chain

7.2 Multiple Choice Questions

1) The basis for all strategic and planning decisions in a supply chain comes from
A) the forecast of demand. B) sales targets.
C) profitability projections. D) production efficiency goals.
2) For push processes, a manager must forecast what customer demand will be in order
to
A) plan the service level. B) plan the level of available capacity and inventory.
C) plan the level of productivity. D) plan the level of production.
3) The result of each stage in the supply chain making its own separate forecast is
A) an accurate forecast. B) a more accurate forecast.
C) a match between supply and demand. D) a mismatch between supply and demand.
4) When all stages of a supply chain produce a collaborative forecast, it tends to be
A) much more detailed. B) much more complex.
C) much more accurate. D) much more flexible.
5) The resulting accuracy of a collaborative forecast enables supply chains to be
A) more responsive but less efficient in serving their customers.
B) both more responsive and more efficient in serving their customers.
C) less responsive but less efficient in serving their customers.
D) both less responsive and less efficient in serving their customers.
6) Leaders in many supply chains have started moving
A) toward independent forecasting to improve their ability to match supply and demand.
B) toward consecutive forecasting to improve their ability to match supply and demand.
C) toward sequential forecasting to improve their ability to match supply and demand.
D) toward collaborative forecasting to improve their ability to match supply and demand.
7) Production can utilize forecasts to make decisions concerning
A) scheduling. B) sales-force allocation.

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C) promotions. D) budgetary planning.
8) Personnel can utilize forecasts to make decisions concerning
A) scheduling. B) promotions.
C) plant/equipment investment. D) purchasing.
9) Mature products with stable demand
A) are usually easiest to forecast. B) are usually hardest to forecast.
C) cannot be forecast. D) do not need to be forecast.
10) When either the supply of raw materials or the demand for the finished product is
highly variable, forecasting and the accompanying managerial decisions
A) are extremely simple. B) are relatively straightforward.
C) are extremely difficult. D) should not be attempted.
11) One of the characteristics of forecasts is
A) aggregate forecasts are usually less accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually less accurate than short-term forecasts.
12) One of the characteristics of forecasts is
A) aggregate forecasts are usually more accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually more accurate than short-term forecasts.
13) Forecasts are always wrong and therefore
A) should include both the expected value of the forecast and a measure of forecast error.
B) should not include both the expected value of the forecast and a measure of forecast error.
C) should only be used when there are no accurate estimates.
D) should be missing the expected value of the forecast and a measure of forecast error.
14) Long-term forecasts are usually less accurate than short-term forecasts because

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A) short-term forecasts have a larger standard deviation of error relative to the mean than
longterm forecasts.
B) short-term forecasts have more standard deviation of error relative to the mean than long-
term forecasts.
C) long-term forecasts have a smaller standard deviation of error relative to the mean than
shortterm forecasts.
D) long-term forecasts have a larger standard deviation of error relative to the mean than
shortterm forecasts.
15) Aggregate forecasts are usually more accurate than disaggregate forecasts because
A) aggregate forecasts tend to have a larger standard deviation of error relative to the mean.
B) aggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
C) disaggregate forecasts tend to have a smaller standard deviation of error relative to the
mean.
D) disaggregate forecasts tend to have less standard deviation of error relative to the mean.
16) In general, the further up the supply chain a company is (or the further they are
from the consumer),
A) the greater the distortion of information they receive.
B) the smaller the distortion of information they receive.
C) the information they receive is more accurate.
D) the information they receive is more useful.
17) Forecasting methods that use historical demand to make a forecast are known as
A) qualitative forecasting methods. B) time series forecasting methods.
C) causal forecasting methods. D) simulation forecasting methods.
18) Forecasting methods that assume that the demand forecast is highly correlated with
certain factors in the environment (e.g., the state of the economy, interest rates, etc.) to
make a forecast are known as
A) qualitative forecasting methods. B) time series forecasting methods.
C) causal forecasting methods. D) simulation forecasting methods.
19) Forecasting methods that imitate the consumer choices that give rise to demand to
arrive at a forecast are known as

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A) qualitative forecasting methods. B) time series forecasting methods.
C) causal forecasting methods. D) simulation forecasting methods.
20) Qualitative forecasting methods are most appropriate when
A) there is good historical data available.
B) there is little historical data available.
C) experts do not have critical market intelligence.
D) forecasting demand into the near future.
21) Which forecasting methods are the simplest to implement and can serve as a good
starting point for a demand forecast?
A) Qualitative forecasting methods B) Time series forecasting methods
C) Causal forecasting methods D) Simulation forecasting methods
22) The goal of any forecasting method is to
A) predict the random component of demand and estimate the systematic component.
B) predict the systematic component of demand and estimate the random component.
C) predict the seasonal component of demand and estimate the random component.
D) predict the random component of demand and estimate the seasonal component.
23) ________ forecasting methods assume that the demand forecast is highly correlated
with certain factors in the environment (the state of the economy, interest rates, etc.).
A) Qualitative B) Time-series C) Causal D) Simulation
24) ________ forecasting methods are primarily subjective and rely on human judgment.
A) Qualitative B) Time-series C) Causal D) Simulation
25) ________ forecasting methods use historical demand to make a forecast.
A) Qualitative B) Time-series C) Causal D) Simulation
26) The multiplicative form of the systematic component of demand is shown as
A) level × trend × seasonal factor. B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor. D) level × (trend + seasonal factor).
27) The additive form of the systematic component of demand is shown as

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A) level × trend × seasonal factor. B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor. D) level × (trend + seasonal factor).
28) The mixed form of the systematic component of demand is shown as
A) level × trend × seasonal factor. B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor. D) level × (trend + seasonal factor).
29) A static method of forecasting
A) assumes that the estimates of level, trend, and seasonality within the systematic component
do not vary as new demand is observed.
B) assumes that the estimates of level, trend, and seasonality within the systematic component
vary as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
30) In adaptive forecasting,
A) there is an assumption that the estimates of level, trend, and seasonality within the
systematic component do not vary as new demand is observed.
B) the estimates of level, trend, and seasonality within the systematic component are not
adjusted as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
31) The moving average forecast method is used when
A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend and seasonality.
D) demand has no observable level or seasonality.
32) The simple exponential smoothing forecast method is appropriate when
A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend and seasonality.

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D) demand has no observable level or seasonality.
33) The trend corrected exponential smoothing (Holt's Model) forecast method is
appropriate when
A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend but no seasonality.
D) demand has no observable level or seasonality.
39) The measure of forecast error where the amount of error of each forecast is squared
and then an average is calculated is
A) mean squared error (MSE). B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE). D) the tracking signal.
40) The measure of forecast error where the absolute amount of error of each forecast is
averaged is
A) mean squared error (MSE). B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE). D) bias.
41) The measure of forecast error where the average absolute error of each forecast is
shown as a percentage of demand is
A) mean squared error (MSE). B) mean absolute percentage error (MAPE).
C) bias. D) the tracking signal.
42) The measure of whether a forecast method consistently over- or underestimates
demand is
A) mean absolute deviation (MAD).
B) mean absolute percentage error (MAPE).
C) bias.
D) the tracking signal.
43) The measure of how significantly a forecast method consistently over- or
underestimates demand is
A) mean squared error (MSE). B) mean absolute deviation (MAD).
C) bias. D) the tracking signal.

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44) Which of the following is a commonly used measure for measuring forecast error?
A) MDE B) MKE C) MAD D) MES
45) The ________ is a good measure of forecast error when the underlying forecast has
significant seasonality and demand varies considerably from one period to the next.
A) MAD B) MSE C) MKE D) MAPE