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Supply Chain Management
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Chapter 5—Demand Forecasting TRUE/FALSE 1. One of the goals of an effective CPFR system is to minimize the negative impacts of the bullwhip effect on supply chains. ANS: T PTS: 1 2. The modern day business environment must deal with a more homogenous consumer base, which has caused the evolution of a more "push" oriented environment where suppliers must focus on manufacturing high volumes of standardized goods. ANS: F PTS: 1 3. Some of the benefits of CPFR include strengthening partner relationships, providing an analysis of sales and order forecasts both upstream and downstream, and allowing collaboration on future requirements and planning. ANS: T PTS: 1 4. The true value of CPFR comes from the sophisticated forecasting algorithms that provide companies with highly accurate forecasts, not from the exchange of forecasting information. ANS: F PTS: 1 5. The difference between a simple regression forecast and a multiple regression forecast is that simple regression is used when there is only one explanatory (or independent) variable, while multiple regression is used when there are numerous explanatory variables. ANS: T PTS: 1 6. Some of the important steps involved in implementation of a CPRF process model include developing a collaborative arrangement, creating a sales forecast, creating an order forecast, and generating those orders. ANS: T PTS: 1 7. Some of the leading suppliers of CPFR solutions mentioned in the textbook are JDA Software Group, i2 Technologies, and Oracle. ANS: T PTS: 1 8. Quantitative forecasting methods are based on opinions and intuition, whereas qualitative forecasting methods use mathematical models and relevant historical data to generate forecasts. ANS: F PTS: 1 9. If you were calculating a forecast using an exponential smoothing model, a calculation using α = 0.2 would be putting a greater emphasis on recent data, while a calculation using α = 0.8 would be putting a greater emphasis on past data. Thus a lower α is more responsive to changes in demand in the most recent periods. ANS: F PTS: 1 10. If you felt that recent demand trends were more significant, and thus should be emphasized more in formulating a forecast, then in forecasting demand for the upcoming demand period, you would probably favor using a simple moving average over the conventional weighted moving average. ANS: F PTS: 1 11. As tighter control limits are instituted for the tracking signal, there is a greater probability of finding exceptions that require no action, but it also means catching changes in demand earlier. ANS: T PTS: 1 12. In the Delphi forecasting method, a group of internal and external experts are surveyed during several rounds in terms of future events and long-term forecasts of demand but the group members do not physically meet. ANS: T PTS: 1 13. The Institute of Supply Management (ISM) surveys more than 300 purchasing and supply executives in the United States using a questionnaire seeking information on "changes in production, new orders, new export orders, imports, employment, inventories, prices, lead-times, and the timeliness of supplier deliveries in their companies comparing the current month to the previous month." The ISM Report on Business focuses only on the manufacturing sector. ANS: F PTS: 1 14. Examples of forecasting accuracy measures are Mean Absolute Deviation, Mean Absolute Percentage Error, and Mean Square Error ANS: T PTS: 1 15. The objective of CPFR is to optimize the supply chain by improving demand forecast accuracy, delivering the right product at the right time to the right location, reducing inventories across the supply chain, avoiding stock-outs, and improving customer service. As a result of the many benefits attributed to CPFR, this business practice has been widely adopted. ANS: F PTS: 1 MULTIPLE CHOICE 1. What does the acronym CPFR represent? a. Coordinated planning and forecasting relationships b. Collaborative planning, forecasting, and replenishment c. Centralized purchasing and forecasting relationships d. Collaborative purchasing, forecasting, and receivables ANS: B PTS: 1 2. Which of the following indices provided by the Institute for Supply Management (ISM) is considered the most important by economists because it is a composite of five weighted, seasonally adjusted indices? a. Purchasing Managers Index b. Export Orders Index c. Production and Inventory Index d. New Orders Index ANS: A PTS: 1 3. According to the textbook, which of the following is NOT a way to closely match supply and demand? a. Holding high amounts of inventory b. Maintaining a rigid pricing system c. Utilizing overtime d. Hiring temporary workers ANS: B PTS: 1 4. According to textbook, the top three challenges for CPFR implementation include all of the following except: a. Making organizational and procedural changes b. Trust between supply chain partners c. Cost d. Supplier lead times ANS: D PTS: 1 5. Some measures of forecasting accuracy include mean absolute deviation, mean absolute percentage error, and mean squared error. The formula for each is dependent on the forecast error, which is calculated by using the equation: a. Actual demand for period t divided by the forecasted demand for period t b. Actual demand for period t plus the forecasted demand for period t c. Actual demand for period t minus the forecasted demand for period t d. The average of Actual demand for period t and forecasted demand for period t ANS: C PTS: 1 6. If a tracking signal is positive, which one of the following is true? a. Actual value is higher than forecast b. Actual value is less than forecast c. Actual value is equal to forecast d. Unable to draw any conclusion ANS: A PTS: 1 7. The exponential smoothing forecast has the same value as the naïve forecast when α in the exponential smoothing model is equal to: a. 0 b. 0.5 c. 1 d. Insufficient information provided to determine answer ANS: C PTS: 1 Data Set E1 Period Sales Volume 1 10000 2 12400 3 14250 4 15750 5 20500 6 18500 7 15750 8 20500 9 21500 10 22550 8. Using Data Set E1, what would be the forecast for period 7 using a four period moving average: (Choose the closest answer.) a. 17625 b. 15225 c. 15300 d. 17250 ANS: D PTS: 1 9. Using Data Set E1, what would be the forecast for period 6 using a five period weighted moving average? The weights for each period are 0.05, 0.10, 0.20, 0.30, and 0.35 from the oldest period to the most recent period, respectively. (Choose the closest answer.) a. 16500 b. 17825 c. 14575 d. 16275 ANS: A PTS: 1 10. Using Data Set E1, what would be the forecast for period 6 using the exponential smoothing method? Assume the forecast for period 5 is 14000. Use a smoothing constant of α = 0.4 (Choose the closest answer.) a. 14575 b. 26100 c. 16600 d. 19700 ANS: C PTS: 1 11. The equation for a simple linear regression that saw sales averaging $225,000 over the last ten periods, and advertising budgets averaging $3,000 over the last 10 periods is: Y = 3250 + 120x This indicates that a $1 increase in advertising will increase sales by: a. $3370 b. $250 c. $120 d. $1875 ANS: C PTS: 1 12. Which one of the following is not a type of qualitative forecasting? a. Sales force composite b. Consumer survey c. Jury of executive opinion d. Naïve method ANS: D PTS: 1 Data Set E2 Month Actual Forecast 1 10 11 2 8 10 3 9 8 4 6 6 5 7 8 13. A forecasting method has produced the following data over the past 5 months shown in Data Set E2. What is the mean absolute deviation (accurate to 2 decimals)? a. −0.60 b. −1.20 c. 1.00 d. 1.25 ANS: C PTS: 1 14. Based on the information in Data Set E2, what is the mean squared error (accurate to 2 decimals)? a. 7.00 b. 1.40 c. 1.00 d. 0.80 ANS: B PTS: 1 15. Using the actual demand shown in the table below, what is the forecast for May (accurate to 1 decimal) using a 4-month weighted moving average and the weights 0.1, 0.2, 0.3, 0.4 (with the heaviest weight applied to the most recent period)? Nov. Dec. Jan. Feb. Mar. Apr. 39 36 40 38 48 46 a. 44.4 b. 43.0 c. 42.5 d. 41.6 ANS: A PTS: 1 16. Given the following information, calculate the forecast (accurate to 2 decimals) for period three using exponential smoothing and α = 0.3. Period Demand Forecast 1 64 59 2 70 a. 36.90 b. 57.50 c. 61.50 d. 63.35 ANS: D PTS: 1 SHORT ANSWER 1. List and describe two types of qualitative forecasting methods. ANS: a. Jury of Executive Opinion: This type of qualitative forecasting is usually used to for long- range forecasting. An experienced group of senior management executives knowledgeable about the market, competitors, and the business environment develop a forecast in the hopes that their experience will provide them with a competitive advantage. b. Delphi Method: Internal and external experts are surveyed about future events and long- term forecasts of demand. Following the survey, the answers are summarized, and this summary is sent back out to the experts. Experts are then able to modify their responses based on the summary. The process continues until a consensus is reached. Experts in this process never physically need to meet; they communicate only through their survey responses and their subsequent responses to the summaries. c. Sales Force Composite: This qualitative forecasting method utilizes will the knowledge of the sales force. The sales force is seen to have recent and accurate information concerning the market and the needs of the customer. Based on this knowledge the sales force is asked to create a forecast to estimate the needs of the cust
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