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Supply Chain Management > Chapter 8 Forecasting > Flashcards

Chapter 8 Forecasting Flashcards

1
Q

What is the process of predicting future events

A

Forecasting

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2
Q

What is the process of selecting actions in anticipation of the forecast ( is made in response to the forecast)

A

Planning

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3
Q

What 4 departments are impacted by forecasting?

A

Marketing
Finance
Operations
Sourcing

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4
Q

What department relies on forecasts to develop estimates of demand and future sales?

A

Marketing

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5
Q

What departments relies on forecasts to assess financial performance and capital investment needs, predict stock prices and investment portfolio returns, and set budgets

A

Financing

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6
Q

What department relies on forecasts to make purchasing decisions and select suppliers

A

Sourcing

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7
Q

T/F- Proper planning for the future starts with a forecast

A

True

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8
Q

What are the 2 impacts of forecasting on supply chain management

A

1) Independent forecasting by supply chain members result in the bullwhip effect
2) Leads to mismatch b/w supply and demand throughout supply chain

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9
Q

What are the principles of forecasting?

A

1) Forecasts are rarely perfect
2) Aggregate forecasts are more accurate (forecast will be more accurate if forecasting enrollment for all LOGT classes vs. each individual LOGT course)
3) Forecasts are more accurate in shorter horizons

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10
Q

What are the two types of forecast methods?

A

1) Qualitative
2) Quantitative

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11
Q

What does qualitative mean?

A

based off judgement or subjective opinions not facts

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12
Q

What does quantitative mean?

A

basing decisions off of calculations and data

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13
Q

T/F- Forecasting drives all other business decisions

A

True

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14
Q

Planning involves what 3 decisions?

A

1) Scheduling existing resources
2) Determining Future Needs
3) Acquiring new resources

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15
Q

Why do firms confuse forecasting and planning?

A

Because firms can impact their own demand
( this is referred to as demand management)

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16
Q

How can firms impact their own demand?

A

By offering incentives, discounts, and promotional ads

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17
Q

The process of influencing demand is known as

A

Demand Management

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18
Q

What department is responsible for linking the organization to its customers

A

Marketing

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19
Q

What department organizes the transformation of raw materials into finished products and services

A

Operations

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20
Q

What is the department responsible for linking the organization to its suppliers

A

Sourcing

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21
Q

What department am I describing based off their jobs?
- Balancing inventory across the network
- Optimizing transportation
-Customer service metrics

A

Logistics

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22
Q

What department am I describing based off their jobs?
- Setting budgets

A

Finance

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23
Q

What department am I describing based off their jobs?
- makes purchasing decisions
- selects suppliers

A

Sourcing

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24
Q

What department am I describing based off their jobs?
- estimating demand
- future trends

A

Marketing

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25
Q

What department am I describing based off their jobs?
- capacity planning
- scheduling
-inventory levels

A

Operations

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26
Q

What kind of methods are useful when identifying customer buying patterns, expectations, and estimating sales of new products?

A

Qualitative

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27
Q

What are the 3 qualitative forecasting methods?

A
  • Executive Opinion
  • Market Research
  • Delphi Method
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28
Q

A group decision making process, subject to bias is known as

A

Executive Opinion

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29
Q

Surveys and interviews used to collect preferences is known as

A

Market Research

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30
Q

A consensus is developed from anonymously contributed expert information is known as

A

The Delphi Method

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31
Q

What forecast methods are used for the Quantitative forecasts?

A

Time Series Model
Casual Models

32
Q

This model generates the forecast from an analysis of a “time series” of the data

A

Time Series Model

33
Q

This model assumes that the variable being forecast is related to other variables in the environment

A

Casual Models

34
Q

What are the strengths of the Qualitative forecast?

A
  • Highly responsive to latest changes in environment
    -Can compensate for “one-time” or unusual events
    -Can include “inside” and “soft” information difficult to quantify
  • Provide user ownership
35
Q

What are the weaknesses of the Qualitative forecast?

A
  • Cannot consider many variables
  • Influenced by the short term
  • Difficulty in understanding relationships
    -Biased (optimism, political manipulation, lack of consistency)
36
Q

What are the strengths of the Quantitative forecast?

A
  • Can consider many variables and complex relationships
  • Objective
    -Consistent
  • Can process large amounts of info
37
Q

What are the weaknesses of the Quantitative forecast?

A

-Only as good as the data and model
- slow to react to changing environments
- Costly and time consuming to model “soft information”
- Requires technical understanding

38
Q

A list of data points of the variable being forecast over time is known as

A

A Time Series

39
Q

What are 6 Time Series models called?

A
  • Naive
    -Simple Mean
    -Simple Moving Average
  • Weighted Moving Average
  • Exponential Smoothing
  • Seasonal Index
40
Q

Which time series model uses last period’s actual demand value as a forecast for the next period?
It is also easy to use, only good if data change little from period to period, and may be used if there is very limited historical data available

A

Naive Method

41
Q

Which time series model uses an average of past data as a forecast? It is also good for level pattern, requires carrying a lot of data, and makes forecasts become more stable over time as the number of data points increase

A

Simple Mean Method

42
Q

Which time series model has all data weighted equally and has the forecast made by averaging a specified number, n, of the most recent data
It is also appropriate for level data pattern and forecast becomes more responsive as n decreases

A

Simple Moving Average

43
Q

Which time series models computation is the same as a simple moving average except that managers have the option of specifying the weights assigned to data points

A

Weighted Moving Average

44
Q

What is the forecast for
May using a three-period
weighted moving average
where weights assigned,
beginning with the most
recent month, at 60%,
30% and 10%?
Jan-38
Feb-27
March-35
April-42
May-

A

May = (42.6)+(35.3)+(27*.1)= 38.4
May = 38.4

45
Q

What is the forecast for
May using a three-period
moving average?
Jan-38
Feb-27
March-42
April-42
May-

A

May=[42+42+27]/3=37
May=37

46
Q

What time series model is a forecasting model that uses a special weighted average procedure to obtain a forecast. It is also easy to use and understand, and provides good forecasts results

A

Exponential Smoothing

47
Q

Café Nervosa forecast a monthly usage of
cream to be 24 gallons in May. The actual
usage in May was 28 gallons. What is the
forecast for June given = 0.3 ?

A

June= (0.3)(28)+(0.7)(24)= 25.2 gallons

June=25.2 gallons

48
Q

What time series model computes the percentage amount by which data for each season are above or below the mean
It is also a simple and logical procedure for computing seasonality and it is only useful when seasonality is confirmed to be present in the data

A

Seasonal Adjustment

49
Q

What are the two casual models?

A

Simple Linear Regression
Multiple Regression

50
Q

A forecasting model that assumes a straight
line relationship between a dependent variable and a single independent variable is known as

A

Simple Linear Regression

51
Q

Define the term.
extends linear regression by looking at a relationship between a dependent variable
and multiple independent variables is known as

A

Multiple Regression

52
Q

What is the straight line linear equation for the model?

A

Y= a +bX

Y= dependent
X= independent
a= Y intercept of the straight line
b= slope of the straight line

53
Q

What is the multiple regression formula?

A

Y = β_0 + β_1X_1 + β_2X_2 +…+ β_k X_k

54
Q

What are the three measures to help determine how are forecasts methods are performing?

A
  • Cumulative Forecast Error (CFE)
  • Mean Absolute Deviation (MAD)
    _ Mean Square Error (MSE)
55
Q

What is the equation for forecast error?

A

e=D-F
e=forecast error for period t
D=actual demand for period t
F= forecast for period t

56
Q

The cumulative sum of each period’s error is

A

Cumulative Forecast Error = Σe_t

57
Q

The average of the sum of the absolute errors is

A

Mean Absolute Deviation
=Σ l Actual - Forecast l
divide by n

58
Q

The average of the squared errors is

A

Mean Square Error=
Σ ( Actual - Forecast ) squared divided by n

59
Q

Reminder

A

for MAD and MSE measures, select the forecasting method that provides the lowest value

60
Q

Reminder

A

For CFE, the ideal value is 0, as this indicates there is no bias in the method selected

61
Q

What effect refers to the increased volatility in orders as they propagate through the supply chain

A

Bullwhip Effect

62
Q

This effect occurs when each individual company in the supply chain forecasts it’s own demand, plans it’s stocking levels, and makes its replenishment decisions independently of other companies in the chain

A

Bullwhip Effect

63
Q

A collaborative process of developing joint forecasts and plans with supply chain partners

A

Collaborative Planning (CPFR)

64
Q

An organization process intended to match supply and demand through functional collaboration

A

Sales and Operations Planning (S&OP)

65
Q

What method is used to forecast sales, market trends, make strategic forecasts, or forecast new products

A

Executive Opinion

66
Q

What is the advantage of executive opinion?

A

includes the latest information

67
Q

What is the disadvantage of an executive opinion?

A

it is subject to many human biases

68
Q
A
69
Q

What forecast is based off analysis of patterns in the time series of data?

A

Time Series Models

70
Q

What forecast is based on modeling relationships between variables?

A

Casual Models

71
Q

Which model looks at data of student enrollment per semester at a university over the past 5 years?

A

Time Series

72
Q

Which forecast believes that university enrollment may be related to unemployment rates, recession levels, or salaries?

A

Casual Models

73
Q

What advantages come from Collaborative Planning, Forecasting and Replenishment

A

-By increasing value to customers
-By sharing marketplace risks
-By improving their overall performance

74
Q

What does CPFR stand for?

A

Collaborative Planning, and Forecasting Replenishment

75
Q

What does S&OP stand for

A

Sales and Operations Planning

76
Q

What are the 4 categories of the CPFR Model?

A

Analysis
Strategy and Planning
Demand & Supply Management
Execution

Supply Chain Management (11 decks)

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