Forecasting and Demand Planning Flashcards

Vocabulary flashcards covering core definitions, qualitative and quantitative forecasting methods, error metrics, and supply chain dynamics from the lecture.

Supply Chain Management

It is the coordination of the network of otherwise independent trading partners who are creating a desired product or service, and then moving it through the supply chain out to customers, when and where the customer wants it.

Efficient Model

The supply chain is configured to produce a large volume of product, as quickly as possible, and at the lowest possible cost.

Responsive Model

The supply chain is configured to be fast and flexible to respond quickly to dynamic market demand and new product launches.

Make-to-Stock/ Push

Producing finished products on the basis of anticipated demand before receipt of an actual customer order

Make to Order/Pull

Producing finished products in response to actual demand, i.e., only after an actual customer order is received.

Forecasting

business function that estimates future demandestimates future demand

for products so that they can be purchased or manufactured in

appropriate quantities in advance of need

Demand Planning

process of combining statistical forecasting techniques and/or judgment to construct demand estimates for products or services.

Independent Demand

demand for an item that is unrelated to

the demand for other items, such as a finished product, a spare

part, or a service part.

Dependent Demand

demand for an item that is directly

related to other items or finished products, such as a component

or material used in making a finished product.

Short-term Forecasting

Forecasting less than three months. Used mainly for tactical decisions

Medium-term Forecasting

Forecasting three months to two years. Used to develop a strategy over the next six to eighteen months

Long-term Forecasting

Forecasting greater than two years. Used to detect general trends and identify major turning points

Qualitative forecasting

opinion and

intuition.

Best use is for long-range forecasts and for new-products

Forecast depends on skill and experience of forecaster(s) and

available information

Quantitative forecasting

Uses

mathematical models and historical data

to make forecasts.

Customer Survey

A qualitative forecasting approach where current or potential customers are directly surveyed (in person, online, phone, or mail) to gather product opinions.

Time Series Forecasting

based on the assumption that the future is an

extension of the past. Historical data is used to predict future

demand

Cause and Effect Forecasting

ssumes that one or more factors

(independent variables) predict future demand

(e.g., seasonality in retail markets)

Trend Variations

The movement of a variable over time, observable by plotting actual demand on a graph, with common patterns including linear, S-curve, asymptotic, and exponential trends.

Random Variations

Short-term instability in data caused by unexpected or unpredictable events such as weather emergencies, natural disasters, or labor strikes.

Seasonal Variations

Repeating patterns of demand variation occurring within a single year that recur from year to year.

Cyclical Variations

Wavelike demand patterns that last longer than one year and extend over multiple years, such as business economic cycles and market expansions or recessions.

Naïve Forecasting

A simplistic time series model that sets the demand forecast for the next time period equal to the actual demand of the most recent time period.

Simple Moving Average Forecasting

Just the mean

Weighted Moving Average

similar to a simple moving average

except that notnot all time periods are valued / weighted equallyvalued / weighted equally.

multiply all weights by the values and add them jawns up

Exponential Smoothing

Requires 3 basic elements3 basic elements: last period’s

actual demand, last period’s forecast, and a smoothing factor, which

is a number greater than 0 and less than 1

(actual * weight) - (forecasted * (1- weight))

Linear Trend Forecasting

imposing a best fit linebest fit line across the

demand data of an entire time series. Used as the basis for

forecasting future values by extending the line past the existing data

and out into the future while maintaining the slope of the line

Simple Linear Regression

A cause-and-effect model that describes the relationship between a single independent variable and a dependent variable (demand) as a straight line.

Multiple Linear Regression

A cause-and-effect model that models the relationship between two or more independent variables (e.g., advertising and selling price) and a dependent variable (demand).

Forecast Error

The difference between actual demand ($A$) and forecast demand ($F$), calculated as $\text{Forecast Error} = A - F$.

Mean Absolute Deviation (MAD)

A measure of forecast error size in actual units, calculated as the average of absolute deviations across $n$ time periods: $\frac{\sum|A - F|}{n}$ .

Mean Absolute Percent Error (MAPE)

A measure of forecast error expressed in percentage terms, calculated as the average ratio of absolute error to actual demand: $\left(\frac{\sum\left(\frac{|A - F|}{A}\right)}{n}\cdot100\right)\%$

Mean Squared Error (MSE)

A forecast accuracy metric that magnifies errors by squaring each deviation before calculating the average over $n$ time periods: $\text{MSE} = \frac{\sum (A - F)^2}{n}$.

Forecast Bias

A consistent deviation of forecast error in one direction, occurring when demand is systematically over-forecasted or under-forecasted.

Running Sum of Forecast Errors (RSFE)

A measure of forecast bias calculated by summing forecast errors over time; positive indicates underestimating demand, while negative indicates overestimating demand.

Tracking Signal

An indicator calculated as $\frac{\text{RSFE}}{\text{MAD}}$ to monitor whether forecast bias remains within pre-set acceptable control limits.

Bullwhip Effect

The magnification of demand variability as order signals move upstream along the supply chain from retailer to raw material supplier due to uncertainty, safety stock buffering, and lack of visibility.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

A business practice where supply chain trading partners share plans, forecasts, and delivery schedules to streamline product movement and reduce the bullwhip effect.

Short Range Supply Chain Planning

detailed planning process for components and parts to

support the master production schedule

Intermediate Range SUpply Chain Planning

Shows the quantity and timing of end items

Long Range Supply Chain Planning

involves planning for actions such as the construction of

facilities and major equipment purchase

Business PLan

Plan that you reevaluate annually and track monthly.

Aggregate Production Plan

Hierarchical planning process that translates annual business plans,

marketing plans, and demand forecasts into a production plan for a

product family* in a plant or facility.

Production Rate

Established in Aggregate Planning. Meeting demand while keeping workforce stable

Increase in inventories

Forseeing demand, rising inventory to meet demand

Decrease inventories

Bringing inventory down to meet demands and wants of customers.

Sales and Operations Planning

A process to develop tactical plans that provides management the ability to

strategically direct the business strategically to achieve a competitive advantage on a

continuous basis by integrating customer-focused marketing plans for new and

existing products with the management of the supply chain.

Capacity = Demand

Just focus on meeting dat demand

Capacity > Demand

Use promotion and advertising to get people to buy yo shi

Capacity < Demand

Put some workload onto a third party company

Master Production Scheduling

what

the company plans to produce expressed in specific

product configurations, quantities, and dates.

Available to Process

Provides a response to customer order inquiries based on product availability. At any point in supply chain, u know how much material u have

Firmed Time Period

If you make changes to your buying during this time period, it pushes all your stuff back. Try to finalize things before this time period

Planned Time Period

U got all your stuff and now you can start preparing the product and have it shipped.

Level Production Strategy

No matter how much ur customer demands, create the same amount of product. Constant level of labor, pairs well with make to stock items.

Chase production Strategy

Adjust your production output based on customer demand. Good for make to order items

Hybrid Production Strategy

Little bit of chase and level. Sets a baseline

production rate based on a stable core workforce, and

then uses other short-term means, such as overtime,

subcontracting and part-time labor to manage short-

term fluctuations in demand

Material Requirements Planning

Computer management tool and calculates all the quantities and needed amounts for all components of product

Bill of Materials

Shows inclusive listing of all raw materials and parts that make the product

Multilevel Bill of Materials

How many different subassemblies u have to make the item

Gross Requirement

The amount of materials you need to make a certain amount of product

Net Requirement

The amount of materials you need to make a certain amount of product minus what u already have

Projected Available Income

Closing inventory at the end of a period. What you have on hand + what youre making - what youre expecting to ship out

Planned Order Release

A specific order for a specific item and quantity to be released to shop or supplier

Firmed Planned ORder

YOu have everything required in order to execute your planned order

Scheduled Receipt

A receipt that says you will recieve ur order at a specific date

Lead Time

Gap between any different activity in supply chain

Time Bucket

Pocket of time for an event to take place

Parent Item

The item which makes demand for other lower level items

Components

Parts demanded by parent

Planning Factor

The amoint of child items you need to make a single unit of parent item

MRP Explosion

Converting parent item’s into its core components

Pegging

Being able to trace back where certain components come from.

Lot Size

Order size u gotta buy in

Personal Insight

The forecast is based on the insight of the most

experienced, most knowledgeable, or most senior person available.

Jury of Executive Opinion

People who know the most about the

product and the marketplace would likely form a jury (i.e., management

panel) to discuss and determine the forecast.

Delphi Method

Basically the same as the Jury of Executive Opinion

except that the input of each of the participants is collected

separately so that people are not influenced by one another

Historical Analogy

A judgmental forecasting technique based on

identifying a sales history that is comparablehistory that is comparable to a present situation,

such as the sales history of a similar product

Customer Survey

Customers are directly approached and asked to

give their opinions about the particular product.

Capacity Planning

Determining amount of production capacity needed by organization to produce goods or services required by customers.

Resource Requirement Planning (RRP)

Long term planning. Check if aggregate resources satisfy the aggregate production plan.

Rough Cut Capacity Planning

Medium range planning. How much business needs to grow.

used to check the feasibility of the Master

Production Schedule. Converts MPS from

the production needed, to the capacity

required, then compares it to capacity

available.

Capacity Requirement Planning (CRP)

Short term. Checks to make sure u have the supplies needed. Checks feasibility of MRP

Distribution Requirements Panning (DRP)

Time phased finished good inventory replenishment plan. Where to distribute goods. Ties physical distribution to manufacturing process

Advanced Planning and Scheduling (APS)

Trying to optimize resources and capacity to meet demand. Optimization/simulation.

Entertrprise Requireent PLanning Systems (ERP)

Connects all areas of a business with a software. SAP/Oracle/AWS

Best of breed ERP

Best application for each indiviual function

Single Integrator

Uses one provider for all systems.

Supply Chain Planning

element of supply chain management

responsible for determining how best to satisfy the requirements

created by the Demand Plan.

Single Level BIll of Materials

Display of components that are directly used in

a parent item, together with the quantity required of each component (i.e.,

the planning factor). Shows only the relationships one level down

Safety Stock

quantity of stock planned to be in inventory to protect against

fluctuations in demand or supply. Over planning supply versus demand can be

used to create safety stock.