Module 1 - B Flashcards
backorder
An unfilled customer order or commitment. It is an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand.
bias
A consistent deviation from the mean in one direction (high or low). A normal property of a good forecast is that it is not biased.
break-even point
The level of production or the volume of sales at which operations are neither profitable nor unprofitable. This is the intersection of the total revenue and total cost curves.
customer relationship management (CRM)
A marketing philosophy based on putting the customer first. Involves the collection and analysis of information designed for sales and marketing decision support (in contrast to enterprise resources planning information) to understand and support existing and potential customer needs. Includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions.
Delphi method
A qualitative forecasting technique where the opinions of experts are combined in a series of iterations. The results of each iteration are used to develop the next, so that convergence of the experts’ opinions is obtained.
demand management
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.
demand planning
Demand that is directly related to or derived from the bill-of-material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part.
extrinsic forecasting method
A forecast method using a correlated leading indicator; for example, estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales
forecast
An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend.
forecast error
The difference between actual demand and forecast demand, stated as an absolute value or as a percentage.
forecasting
The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.
four Ps
A set of marketing tools to direct the business offering to the customer. The four Ps are product, price, place, and promotion.
independent demand
The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand
interplant demand
One plant’s need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.
intrinsic forecast method
A forecast based on internal factors, such as an average of past sales.
leading indicator
A specific business activity index that indicates future trends. For example, housing starts is a leading indicator for the industry that supplies builders’ hardware
marketing strategy
The basic plan the marketing function expects to use to achieve its business and marketing objectives in a particular market. Includes marketing expenditures, marketing mix, and marketing allocation
mean absolute deviation (MAD)
The average of the absolute values of the deviations of observed values from some expected value. MAD can be calculated based on observations and the arithmetic mean of those observations. An alternative is to calculate absolute deviations of actual sales data minus forecast data. This data can be averaged in the usual arithmetic way or with exponential smoothing.
product family
A group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer. Can be different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning).
seasonality
A predictable repetitive pattern of demand measured within a year where demand grows and declines. These are calendar-related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly.
time bucket
A number of days of data summarized into a columnar or row-wise display. For example, a weekly time bucket contains all the relevant data for an entire week. Weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP.
total cost curve
1) In cost-volume-profit (breakeven) analysis, the total cost curve is composed of total fixed and variable costs per unit multiplied by the number of units provided. Breakeven quantity occurs where the total cost curve and total sales revenue curve intersect. 2) In inventory theory, the total cost curve for an inventory item is the sum of the costs of acquiring and carrying the item.
tracking signal
The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. Used to signal when the validity of the forecasting model might be in doubt.
trend
General upward or downward movement of a variable over time (e.g., demand, process attribute).
