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What is Forecasting and Demand Planning?
Forecasting and Demand Planning are the foundation of supply chain planning and essential for customer satisfaction.
What is Forecasting?
The process of estimating future demand using historical data and analysis.
What is Demand Planning?
A process that combines statistical forecasting with business judgment to estimate future demand for products or services.
What are the two types of demand?
Independent Demand (not related to other items, forecasted) and Dependent Demand (directly related to other items, calculated).
What is an example of Independent vs. Dependent Demand?
A bicycle has independent demand, while its components (frame, seat, wheels) have dependent demand.
What are the three forecasting horizons?
Short-term, Medium-term, and Long-term forecasting.
Why is forecasting important?
It enables better planning, reduces costs and stockouts, and improves customer service.
What is the biggest challenge with forecasting?
Forecasts are always inaccurate, but the goal is to minimize errors and improve consistency.
What are the two main types of forecasting techniques?
Qualitative (based on opinions and judgment) and Quantitative (based on mathematical models and historical data).
What are examples of Qualitative Forecasting methods?
Personal Insight, Jury of Executive Opinion, Delphi Method, Historical Analogy, and Customer Surveys.
What is the Jury of Executive Opinion method?
A panel of experts discuss and reach a consensus forecast.
What is the Delphi Method?
A forecasting method where experts provide input separately to avoid bias, with multiple rounds until consensus is reached.
What is the Historical Analogy forecasting method?
Using sales data from a similar product to predict the demand for a new product.
What is Quantitative Forecasting?
A forecasting method that uses mathematical models and historical data to predict future demand.
What are the two types of Quantitative Forecasting?
Time Series (using past trends to predict future demand) and Cause and Effect (predicting demand based on external factors).
What are the common variations in forecasting data?
Trend Variations, Random Variations, Seasonal Variations, and Cyclical Variations.
What is a Time Series Forecasting Model?
A method that uses past data to predict future demand.
What is a NaĂŻve Forecasting Model?
A method that assumes the next period's demand will be the same as the last period's demand.
What is a Simple Moving Average Forecast?
A method that averages demand over a specific number of past periods to predict future demand.
What is a Weighted Moving Average Forecast?
A forecasting method that assigns different weights to past periods, giving more importance to recent data.
What is Exponential Smoothing?
A forecasting method that applies decreasing weights to past data using a smoothing factor.
What is Linear Trend Forecasting?
A method that fits a straight line to historical demand data and extends it into the future.
What is Simple Linear Regression in forecasting?
A method that predicts demand using a single independent variable (e.g., advertising spending).
What is Multiple Linear Regression in forecasting?
A method that predicts demand using two or more independent variables (e.g., advertising and pricing).
What is Forecast Error?
The difference between actual demand and forecasted demand.
How is Forecast Error measured?
It can be measured in absolute units or as a percentage of demand.
What is Mean Absolute Deviation (MAD)?
A measure of forecast accuracy that calculates the average absolute error over a period.
What is Mean Absolute Percentage Error (MAPE)?
A measure that expresses forecast error as a percentage of actual demand.
What is Forecast Bias?
A consistent deviation in forecasted demand, either consistently over-forecasting or under-forecasting.
What is the Bullwhip Effect?
A supply chain phenomenon where small fluctuations in demand lead to larger fluctuations upstream in the supply chain.
What causes the Bullwhip Effect?
Poor forecasting, overreaction to demand fluctuations, and lack of communication between supply chain partners.
How can the Bullwhip Effect be reduced?
Through collaboration, real-time data sharing, synchronized supply chain planning, and inventory management strategies.
What is Collaborative Planning
Forecasting, and Replenishment (CPFR)?,A business practice where trading partners share forecasts and supply chain information to improve accuracy and efficiency.
What are the benefits of CPFR?
Better customer service, lower inventory costs, improved quality, and reduced supply chain disruptions.
What is Supply Chain Agility?
The ability of an organization to quickly respond to changes in demand or supply without sacrificing cost or quality.
How can companies improve supply chain agility?
By monitoring performance, balancing speed and cost, and adapting to market conditions.
How does social media impact forecasting?
Social sentiment analysis helps companies predict demand trends, address crises, and research competition.
Why is forecasting difficult?
It is always wrong to some degree, and external factors constantly change demand patterns.
How can companies improve forecast accuracy?
By combining qualitative and quantitative methods, adapting to trends, and collaborating with supply chain partners.
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