Chapter 7 Testbank

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Chapter 7 - Testbank
Global Supply Chain Management (Vrije Universiteit Amsterdam)
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Supply Chain Management, 6e, Global Edition (Chopra/Meindl)

Chapter 7 Demand Forecasting in a Supply Chain
7.1 True/False Questions
1) The forecast of demand forms the basis for all strategic and planning decisions in a supply
chain.
Answer: TRUE
Diff: 2
Topic: 7.1 The Role of Forecasting in a Supply Chain
AACSB: Application of knowledge
Objective: LO 7.1: Understand the role of forecasting for both an enterprise and a supply chain.
2) For pull processes, a manager must forecast what customer demand will be in order to plan the
level of available capacity and inventory.
Answer: TRUE
Diff: 2
3) The result when each stage in the supply chain makes its own separate forecast is often a
match between supply and demand because these forecasts are often very different.
Answer: FALSE
Diff: 2
4) Leaders in many supply chains have started moving toward collaborative forecasting to
improve their ability to match supply and demand.
Answer: TRUE
Diff: 2
5) Mature products with stable demand are usually the most difficult to forecast.
Answer: FALSE
Diff: 2
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6) Forecasting and the accompanying managerial decisions are extremely difficult when either
the supply of raw materials or the demand for the finished product is highly variable.
Answer: TRUE
Diff: 1
AACSB: Analytical thinking
7) Forecasts should include both the expected value of the forecast and a measure of forecast
error.
Answer: TRUE
Diff: 2
8) Aggregate forecasts are usually more accurate than disaggregate forecasts, as they tend to
have a smaller standard deviation of error relative to the mean.
Answer: TRUE
Diff: 2
9) Collaborative forecasting based on sales to the end customer can help enterprises further up
the supply chain reduce forecast error.
Answer: TRUE
Diff: 2
10) Qualitative forecasting methods are most appropriate when there is good historical data
available or when experts do not have market intelligence that is critical in making the forecast.
Answer: FALSE
Diff: 2
Topic: 7.3 Components of a Forecast and Forecasting Methods
Objective: LO 7.2: Identify the components of a demand forecast.
11) Time series forecasting methods are the most difficult methods to implement.
Answer: FALSE
Diff: 2
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12) Causal forecasting methods find a correlation between demand and environmental factors
and use estimates of what environmental factors will be to forecast future demand.
Answer: TRUE
Diff: 2
13) The forecast error measures the difference between the forecast and the estimate.
Answer: FALSE
Diff: 2
14) The goal of any forecasting method is to predict the systematic component of demand and
estimate the random component.
Answer: TRUE
Diff: 2
Topic: 7.5 Time-Series Forecasting Methods
Objective: LO 7.3: Forecast demand in a supply chain given historical demand data using time-
series methodologies.
15) In adaptive forecasting, the estimates of level, trend, and seasonality are updated after each
demand observation.
Answer: TRUE
Diff: 2
16) The moving average forecast method is used when demand has an observable trend or
seasonality.
Answer: FALSE
Diff: 2
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17) Forecasting and the accompanying managerial decisions are extremely difficult when either
the supply of raw materials or the demand for the finished product is highly unpredictable.
Answer: TRUE
Diff: 1
18) Long-term forecasts have a larger standard deviation of error relative to the mean than short-
term forecasts.
Answer: TRUE
Diff: 1
Topic: 7.2 Characteristics of Forecasts
7.2 Multiple Choice Questions
1) The basis for all strategic and planning decisions in a supply chain comes from
A) the forecast of demand.
B) sales targets.
C) profitability projections.
D) production efficiency goals.
Answer: A
Diff: 1
2) For push processes, a manager must forecast what customer demand will be in order to
A) plan the service level.
B) plan the level of available capacity and inventory.
C) plan the level of productivity.
D) plan the level of production.
Answer: D
Diff: 2
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3) The result of each stage in the supply chain making its own separate forecast is
A) an accurate forecast.
B) a more accurate forecast.
C) a match between supply and demand.
D) a mismatch between supply and demand.
Answer: D
Diff: 2
4) When all stages of a supply chain produce a collaborative forecast, it tends to be

A) much more detailed.
B) much more complex.
C) much more accurate.
D) much more flexible.
Answer: C
Diff: 2
5) The resulting accuracy of a collaborative forecast enables supply chains to be

A) more responsive but less efficient in serving their customers.
B) both more responsive and more efficient in serving their customers.
C) less responsive but less efficient in serving their customers.
D) both less responsive and less efficient in serving their customers.
Answer: B
Diff: 2
6) Leaders in many supply chains have started moving

A) toward independent forecasting to improve their ability to match supply and demand.
B) toward consecutive forecasting to improve their ability to match supply and demand.
C) toward sequential forecasting to improve their ability to match supply and demand.
D) toward collaborative forecasting to improve their ability to match supply and demand.
Answer: D
Diff: 2
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7) Production can utilize forecasts to make decisions concerning

A) scheduling.
B) sales-force allocation.
C) promotions.
D) budgetary planning.
Answer: A
Diff: 2
8) Personnel can utilize forecasts to make decisions concerning

A) scheduling.
B) promotions.
C) plant/equipment investment.
D) purchasing.
Answer: B
Diff: 2
9) Mature products with stable demand

A) are usually easiest to forecast.
B) are usually hardest to forecast.
C) cannot be forecast.
D) do not need to be forecast.
Answer: A
Diff: 1
10) When either the supply of raw materials or the demand for the finished product is highly
variable, forecasting and the accompanying managerial decisions
A) are extremely simple.
B) are relatively straightforward.
C) are extremely difficult.
D) should not be attempted.
Answer: C
Diff: 1
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11) One of the characteristics of forecasts is

A) aggregate forecasts are usually less accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually less accurate than short-term forecasts.
Answer: D
Diff: 2
12) One of the characteristics of forecasts is

A) aggregate forecasts are usually more accurate than disaggregate forecasts.
B) disaggregate forecasts are usually more accurate than aggregate forecasts.
C) short-term forecasts are usually less accurate than long-term forecasts.
D) long-term forecasts are usually more accurate than short-term forecasts.
Answer: A
Diff: 2
13) Forecasts are always wrong and therefore

A) should include both the expected value of the forecast and a measure of forecast error.
B) should not include both the expected value of the forecast and a measure of forecast error.
C) should only be used when there are no accurate estimates.
D) should be missing the expected value of the forecast and a measure of forecast error.
Answer: A
Diff: 1
14) Long-term forecasts are usually less accurate than short-term forecasts because
A) short-term forecasts have a larger standard deviation of error relative to the mean than long-
term forecasts.
B) short-term forecasts have more standard deviation of error relative to the mean than long-term
forecasts.
C) long-term forecasts have a smaller standard deviation of error relative to the mean than short-
term forecasts.
D) long-term forecasts have a larger standard deviation of error relative to the mean than short-
term forecasts.
Answer: D
Diff: 2
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15) Aggregate forecasts are usually more accurate than disaggregate forecasts because
A) aggregate forecasts tend to have a larger standard deviation of error relative to the mean.
B) aggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
C) disaggregate forecasts tend to have a smaller standard deviation of error relative to the mean.
D) disaggregate forecasts tend to have less standard deviation of error relative to the mean.
Answer: B
Diff: 1
16) In general, the further up the supply chain a company is (or the further they are from the
consumer),
A) the greater the distortion of information they receive.
B) the smaller the distortion of information they receive.
C) the information they receive is more accurate.
D) the information they receive is more useful.
Answer: A
Diff: 2
17) Forecasting methods that use historical demand to make a forecast are known as
A) qualitative forecasting methods.
B) time series forecasting methods.
C) causal forecasting methods.
D) simulation forecasting methods.
Answer: B
Diff: 2
18) Forecasting methods that assume that the demand forecast is highly correlated with certain
factors in the environment (e.g., the state of the economy, interest rates, etc.) to make a forecast
are known as
Answer: C
Diff: 2
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19) Forecasting methods that imitate the consumer choices that give rise to demand to arrive at a
forecast are known as
Answer: D
Diff: 2
20) Qualitative forecasting methods are most appropriate when

A) there is good historical data available.
B) there is little historical data available.
C) experts do not have critical market intelligence.
D) forecasting demand into the near future.
Answer: B
Diff: 2
21) Which forecasting methods are the simplest to implement and can serve as a good starting
point for a demand forecast?
A) Qualitative forecasting methods
B) Time series forecasting methods
C) Causal forecasting methods
D) Simulation forecasting methods
Answer: B
Diff: 2
22) The goal of any forecasting method is to

A) predict the random component of demand and estimate the systematic component.
B) predict the systematic component of demand and estimate the random component.
C) predict the seasonal component of demand and estimate the random component.
D) predict the random component of demand and estimate the seasonal component.
Answer: B
Diff: 2
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23) ________ forecasting methods assume that the demand forecast is highly correlated with
certain factors in the environment (the state of the economy, interest rates, etc.).
A) Qualitative
B) Time-series
C) Causal
D) Simulation
Answer: C
Diff: 2
24) ________ forecasting methods are primarily subjective and rely on human judgment.
A) Qualitative
B) Time-series
C) Causal
D) Simulation
Answer: A
Diff: 2
25) ________ forecasting methods use historical demand to make a forecast.

A) Qualitative
B) Time-series
C) Causal
D) Simulation
Answer: B
Diff: 2
26) The multiplicative form of the systematic component of demand is shown as

A) level × trend × seasonal factor.
B) level + trend + seasonal factor.
C) (level + trend) × seasonal factor.
D) level × (trend + seasonal factor).
Answer: A
Diff: 1
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27) The additive form of the systematic component of demand is shown as

Answer: B
Diff: 1
28) The mixed form of the systematic component of demand is shown as

Answer: C
Diff: 3
29) A static method of forecasting

A) assumes that the estimates of level, trend, and seasonality within the systematic component do
not vary as new demand is observed.
B) assumes that the estimates of level, trend, and seasonality within the systematic component
vary as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
Answer: A
Diff: 1
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30) In adaptive forecasting,

A) there is an assumption that the estimates of level, trend, and seasonality within the systematic
component do not vary as new demand is observed.
B) the estimates of level, trend, and seasonality within the systematic component are not adjusted
as new demand is observed.
C) the estimates of level, trend, and seasonality are updated after each demand observation.
D) All of the above are true.
Answer: C
Diff: 1
31) The moving average forecast method is used when

A) demand has observable trend or seasonality.
B) demand has no observable trend or seasonality.
C) demand has observable trend and seasonality.
D) demand has no observable level or seasonality.
Answer: B
Diff: 2
32) The simple exponential smoothing forecast method is appropriate when

C) demand has observable trend and seasonality.
Answer: B
Diff: 2
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33) The trend corrected exponential smoothing (Holt's Model) forecast method is appropriate
when
C) demand has observable trend but no seasonality.
Answer: C
Diff: 2
Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.
Month Demand
January 11
February 18
March 31
April 39
May 44
June 53
July 67
August 82
September 96
34) Use a simple moving average of three periods to forecast the demand for July. What is the
forecast?
A) 67
B) 58
C) 48.5
D) 45.3
Answer: D
Diff: 2
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35) Use exponential smoothing to forecast the demand for March. What is the forecast if α = 0.7?
A) 27.5
B) 31.25
C) 28.75
D) 29.25
Answer: A
Diff: 2
36) What is the trend component of Holt's model for period 0?

A) -2.5
B) 10.3
C) 2.5
D) 6.4
Answer: B
Diff: 3
37) What is the level component of Holt's model for period 0?

A) -2.5
B) 10.3
C) 2.5
D) 6.4
Answer: A
Diff: 3
38) What is the level component of Holt's model for period 0?

A) -2.5
B) 10.3
C) 2.5
D) 6.4
Answer: A
Diff: 3
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39) The measure of forecast error where the amount of error of each forecast is squared and then
an average is calculated is
A) mean squared error (MSE).
B) mean absolute deviation (MAD).
C) mean absolute percentage error (MAPE).
D) the tracking signal.
Answer: A
Diff: 2
Topic: 7.6 Measures of Forecast Error
Objective: LO 7.4: Analyze demand forecasts to estimate forecast error.
40) The measure of forecast error where the absolute amount of error of each forecast is
averaged is
C) mean absolute percentage error (MAPE).
D) bias.
Answer: B
Diff: 2
41) The measure of forecast error where the average absolute error of each forecast is shown as a
percentage of demand is
B) mean absolute percentage error (MAPE).
C) bias.
Answer: B
Diff: 3
42) The measure of whether a forecast method consistently over- or underestimates demand is
A) mean absolute deviation (MAD).
B) mean absolute percentage error (MAPE).
C) bias.
Answer: C
Diff: 2
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43) The measure of how significantly a forecast method consistently over- or underestimates
demand is
C) bias.
Answer: D
Diff: 3
44) Which of the following is a commonly used measure for measuring forecast error?
A) MDE
B) MKE
C) MAD
D) MES
Answer: C
Diff: 2
45) The ________ is a good measure of forecast error when the underlying forecast has
significant seasonality and demand varies considerably from one period to the next.
A) MAD
B) MSE
C) MKE
D) MAPE
Answer: D
Diff: 3
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Scenario 7.2
Period Demand
1 173
2 177
3 180
4 151
5 168
6 184
7 198
8 191
9 167
10 177
46) Calculate the MAD for this scenario if the forecasts for periods 1-10 are in order, 176.6,
174.2, 176.1, 178.7, 160.4, 165.4, 177.7, 191.1, 191.0, and 175.2.
A) 11.04
B) 9.52
C) 10.40
D) 12.25
Answer: A
Diff: 3
47) Calculate the MSE for this scenario if the forecasts for periods 1-10 are in order, 176.6,
174.2, 176.1, 178.7, 160.4, 165.4, 177.7, 191.1, 191.0, and 175.2.
A) 216.60
B) 219.80
C) 210.40
D) 221.20
Answer: B
Diff: 3
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48) What is the largest value for the tracking signal (either under or overforecasting) if the
forecasts for periods 1-10 are in order, 176.6, 174.2, 176.1, 178.7, 160.4, 165.4, 177.7, 191.1,
191.0, and 175.2?
A) 1.86
B) -2.07
C) 2.58
D) 3.24
Answer: C
Diff: 3
49) What is the mean absolute percentage error if the forecasts for periods 1-10 are in order,
176.6, 174.2, 176.1, 178.7, 160.4, 165.4, 177.7, 191.1, 191.0, and 175.2?
A) 5.8
B) 5.6
C) 5.4
D) 5.2
Answer: B
Diff: 3
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50) Use Solver to determine the alpha that minimizes the MAD for the ten period forecast for the
data that appear in this table. Use the actual demand as the forecast for period 1 and then use
exponential smoothing.
Period Demand
1 300
2 250
3 200
4 500
5 128
6 184
7 166
8 191
9 167
10 177
A) 0.2
B) 0.3
C) 0.4
D) 0.5
Answer: D
Diff: 3
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7.3 Essay Questions
1) Describe the basic characteristics of forecasts that managers should be aware.

Answer: Companies and supply chain managers should be aware of the following characteristics
of forecasts:
1. Forecasts are always wrong and should thus include both the expected value of the forecast
and a measure of forecast error. Thus, the forecast error (or demand uncertainty) must be a key
input into most supply chain decisions. An estimation of demand uncertainty is unfortunately
often missing from forecasts, resulting in estimates that vary widely among different stages of a
supply chain that is not forecasting collaboratively.
2. Long-term forecasts are usually less accurate than short-term forecasts; that is, long-term
forecasts have a larger standard deviation of error relative to the mean than short-term forecasts.
3. Aggregate forecasts are usually more accurate than disaggregate forecasts, as they tend to
have a smaller standard deviation of error relative to the mean. The greater the degree of
aggregation, the more accurate the forecast.
4. In general, the further up the supply chain a company is (or the further they are from the
consumer), the greater the distortion of information they receive. One classic example of this is
the bullwhip effect, where order variation is amplified as orders move further from the end
customer. As a result, the further up the supply chain an enterprise exists, the higher the forecast
error. Collaborative forecasting based on sales to the end customer can help enterprises further
up the supply chain reduce forecast error.
Diff: 2
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2) Explain the basic, six-step approach to help an organization perform effective forecasting.
Answer: The following basic, six-step approach helps an organization perform effective
forecasting:
1. Understand the objective of forecasting. The objective of every forecast is to support
decisions that are based on the forecast, so an important first step is to clearly identify these
decisions. Examples of such decisions include how much of a particular product to make, how
much to inventory, and how much to order. All parties affected by a supply chain decision should
be aware of the link between the decision and the forecast. Failure to make these decisions
jointly may result in either too much or too little product in various stages of the supply chain.
2. Integrate demand planning and forecasting throughout the supply chain. A company should
link its forecast to all planning activities throughout the supply chain. These include capacity
planning, production planning, promotion planning, and purchasing, among others. This link
should exist at both the information system and the human resource management level. As a
variety of functions are affected by the outcomes of the planning process, it is important that all
of them are integrated into the forecasting process. To accomplish this integration, it is a good
idea for a firm to have a cross-functional team, with members from each affected function
responsible for forecasting demand–and an even better idea to have members of different
companies in the supply chain working together to create a forecast.
3. Understand and identify customer segments. Here a firm must identify the customer segments
the supply chain serves. Customers may be grouped by similarities in service requirements,
demand volumes, order frequency, demand volatility, seasonality, and so forth. In general,
companies may use different forecasting methods for different segments. A clear understanding
of the customer segments facilitates an accurate and simplified approach to forecasting.
4. Identify the major factors that influence the demand forecast. A proper analysis of these
factors is central to developing an appropriate forecasting technique. The main factors
influencing forecasts are demand, supply, and product-related phenomena. On the demand side, a
company must ascertain whether demand is growing, declining, or has a seasonal pattern. These
estimates must be based on demand–not sales data. On the supply side, a company must consider
the available supply sources to decide on the accuracy of the forecast desired. If alternate supply
sources with short lead times are available, a highly accurate forecast may not be especially
important. However, if only a single supplier with a long lead time is available, an accurate
forecast will have great value. On the product side, a firm must know the number of variants of a
product being sold and whether these variants substitute for or complement each other. If
demand for a product influences or is influenced by demand for another product, the two
forecasts are best made jointly.
5. Determine the appropriate forecasting technique. In selecting an appropriate forecasting
technique, a company should first understand the dimensions that will be relevant to the forecast.
These dimensions include geographical area, product groups, and customer groups. The
company should understand the differences in demand along each dimension. A firm would be
wise to have different forecasts and techniques for each dimension. At this stage, a firm selects
an appropriate forecasting method from the four methods discussed earlier–qualitative, time
series, causal, or simulation. Using a combination of these methods is often effective.
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6. Establish performance and error measures for the forecast. Companies should establish clear
performance measures to evaluate the accuracy and timeliness of the forecast. These measures
should correlate with the objectives of the business decisions based on these forecasts.
Each organization must use all six steps to forecast effectively.
Diff: 2
Topic: 7.4 Basic Approach to Demand Forecasting
Scenario 7.1 - Marshmallow Madness
Historical demand for Peeps is as displayed in the table.
Month Demand
January 11
February 18
March 31
April 39
May 44
June 53
July 67
August 82
September 96
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3) Develop forecasts for June through October using these techniques: moving average of two
period, simple exponential smoothing with an alpha of 0.8, and Holt's method. For the
exponential smoothing model assume that the forecast for May is the actual demand for May.
Comment on the use of these three methods to generate a forecast in this situation.
Answer: The moving average of two periods results in these forecasts:
Month Actual MA(2)

June 53 41.5
July 67 48.5
August 82 60
September 96 74.5
October 89
The exponential smoothing with α = 0.8
Month Actual Expon(.8)

June 53 44
July 67 51.2
August 82 63.8
September 96 78.4
October 92.5
For Holt's model the regression equation has an intercept of -2.5 and a trend component of 10.3.
Beta was used as 0.1 and alpha 0.2.
Month Actual Forecast Error Level Trend

June 53 59.1 6.1 57.8 10.1
July 67 58.0 1.0 67.8 10.1
August 82 77.9 -4.1 78.7 10.2
September 96 88.9 -7.1 90.3 10.3
October 100.7
The data show a strong trend, so use of the simple moving average or exponential smoothing will
just result in forecasts that lag behind the actual demand. Holt's model can capture the trend and
provide a much more accurate forecast.
Diff: 2
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Scenario 7.2
Period Demand
1 173
2 177
3 180
4 151
5 168
6 184
7 198
8 191
9 167
10 177
4) Develop a forecast for this data using simple exponential smoothing with an alpha of 0.66.
Then calculate MAD, MSE and the tracking signal.
Answer: The forecast, forecast error, absolute deviation, bias and tracking signal appear in the
table.
Period Forecast Error Abs Error Bias TS

1 176.6 3.6 3.6 3.6 1.00
2 174.2 -2.8 2.8 0.8 0.26
3 176.1 -3.9 3.9 -3.1 -0.91
4 178.7 27.7 27.7 24.5 2.58
5 160.4 -7.6 7.6 16.9 1.86
6 165.4 -18.6 18.6 -1.6 -0.15
7 177.7 -20.3 20.3 -22.0 -1.82
8 191.1 0.1 0.1 -21.9 -2.07
9 191.0 24.0 24.0 2.2 0.18
10 175.2 -1.8 1.8 0.3 0.03
The MAD is 11.043

The MSE is 219.79
The tracking signal appears in the table.
Diff: 3
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5) Discuss key issues of forecasting in practice.

Answer: Collaborate in building forecasts. Collaboration with supply chain partners can often
create a much more accurate forecast. However, most forecasts are still made not just within one
company, but within one function in a company. It takes an investment of time and effort to build
the relationships with your partners to begin sharing information and creating collaborative
forecasts. The supply chain benefits of collaboration, however, are often an order of magnitude
greater than the cost.
The value of data depends on where you are in the supply chain. Although collaboration is a hot
topic, this does not mean that reams and reams of data need to be shared across the supply chain.
The value of data depends on where one sits in the supply chain. To avoid being overwhelmed
with data when collaborating and not being able to sort out what's valuable, think about what
data is valuable to each member of the supply chain and share only that data.
Be sure to distinguish between demand and sales. Often, companies make the mistake of looking
at historical sales and assuming that this is what the historical demand was. To get true demand,
adjustments need to be made for unmet demand due to stockouts, competitor actions, pricing,
promotions, and so forth. In many cases, these adjustments are qualitative in nature but are
crucial to accurately reflect reality. Although it is not always easy, making an adjustment in a
forecast to move toward demand from just sales will increase accuracy and therefore supply
chain performance.
Diff: 2
Topic: 7.11 Forecasting in Practice
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Global Supply Chain Management (Vrije Universiteit Amsterdam)

Studocu is not sponsored or endorsed by any college or university

Supply Chain Management, 6e, Global Edition (Chopra/Meindl)

7.1 True/False Questions

Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

7.2 Multiple Choice Questions

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4) When all stages of a supply chain produce a collaborative forecast, it tends to be

5) The resulting accuracy of a collaborative forecast enables supply chains to be

6) Leaders in many supply chains have started moving

Downloaded by Võ Ngân ([email protected])

7) Production can utilize forecasts to make decisions concerning

8) Personnel can utilize forecasts to make decisions concerning

9) Mature products with stable demand

Downloaded by Võ Ngân ([email protected])

11) One of the characteristics of forecasts is

12) One of the characteristics of forecasts is

13) Forecasts are always wrong and therefore

Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

20) Qualitative forecasting methods are most appropriate when

22) The goal of any forecasting method is to

Downloaded by Võ Ngân ([email protected])

25) ________ forecasting methods use historical demand to make a forecast.

26) The multiplicative form of the systematic component of demand is shown as

Downloaded by Võ Ngân ([email protected])

27) The additive form of the systematic component of demand is shown as

28) The mixed form of the systematic component of demand is shown as

29) A static method of forecasting

Downloaded by Võ Ngân ([email protected])

30) In adaptive forecasting,

31) The moving average forecast method is used when

32) The simple exponential smoothing forecast method is appropriate when

Downloaded by Võ Ngân ([email protected])

Scenario 7.1 - Marshmallow Madness

Historical demand for Peeps is as displayed in the table.

Downloaded by Võ Ngân ([email protected])

36) What is the trend component of Holt's model for period 0?

37) What is the level component of Holt's model for period 0?

38) What is the level component of Holt's model for period 0?

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Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

7.3 Essay Questions

1) Describe the basic characteristics of forecasts that managers should be aware.

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Scenario 7.1 - Marshmallow Madness

Historical demand for Peeps is as displayed in the table.

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Month Actual MA(2)

The exponential smoothing with α = 0.8

Month Actual Expon(.8)

Month Actual Forecast Error Level Trend