SCM Test Two Multiple Choice study
note verified to pass 2026/2027
Demand management (7a) - correct answer "focused efforts to estimate and manage customers'
demand, with the intention of using this information to shape operating decisions."
- create greater value for the end-user.
- proven mechanism to minimize costs without reducing capacities
Demand Manager Threats (7a) - correct answer •Lack of coordination among departments (i.e.,
functional silos) results in little or no response coordination to demand data.
•Too much emphasis on demand forecasting, with less on collaborative efforts and plans that arrive
from forecasts.
•Demand information is used primarily for operational and tactical planning rather than for strategic
purposes.
Demand Forecasting (7a) - correct answer •The first major component of demand management is
forecasting product demand (amount, when, where).
•While many statistical techniques exist to forecast demand, in general, all forecasts will ultimately be
wrong (goal is to minimize the error between actual and forecasted demand).
Independent Demand (7a) - correct answer demand for the primary item or finished product
ex. demand for a bicycle
Dependent Demand (7a) - correct answer -is directly influenced by the demand for the independent
item
ex. bike tires because the number of tires demanded is determined by the number of bikes demanded
,Mean Squared Error (MSE): (7a) - correct answer Squares each period error so that the negative and
positive errors do not cancel one another out.
Mean Absolute Deviation (MAD): (7a) - correct answer Takes the absolute value of each error so the
negative and positive signs are removed and a good indication of average error per period is calculated.
•Mean Absolute Percent Error (MAPE): (7a) - correct answer Relates forecast error to level of demand
so different forecast types can be compared.
Internal Forecasting (7a) - correct answer •Sales & Operations Planning (S&OP) - Five Step Process
External Forecasting (7a) - correct answer •Collaborative Planning, Forecasting, and Replenishment
(CPFR)
Demand Imbalance (7a) - correct answer The need to manage supply-demand imbalances arises due to
demand fluctuation sources and the bullwhip effect. Four common approaches are categorized as
external or internal
Random Variable (7a) - correct answer -a development that cannot be anticipated and is usually the
cause to hold safety stock to avoid stockouts.
ex. hurricane that devastated parts of Louisiana caused an unexpected surge in the demand for building
supplies in that region.
Trend Variable (7a) - correct answer - gradual increase of decrease in demand over time for an
organization
Ex. Advanced electronics components in the consumer market is trending upwards.
Seasonal Variable (7a) - correct answer Ex. chocolate manufactures are normally faced with several
seasonal patterns during the year, such as Valentine's day, Easter, and Halloween.
, Business Cycle (7a) - correct answer Usually driven by nation's economy and can be growing, stagnant,
or declining. These patterns usually occur over a period of more than one year.
Anticipatory Stocks (9a) - correct answer Accumulated inventory to hedge against the risks that will
negatively impact its source of supply. (Examples Strikes, shortages, weather)
Seasonal Stocks (9a) - correct answer Generally challenged when determining how much
inventory to accumulate (Example: Agriculture)
Inventory Carrying Cost (ICC) (9a) - correct answer The costs that are incurred by inventory at rest and
waiting to be used. ICC is a ratio that describes the relationship between the cost of owning that
inventory item per year and the inventory value.
Interpretation of ICC
Step One: Determine the value of a particular item
that is stored in inventory (exclude in-transit & WIP).
•
Step Two: Determine the cost associated with each
of the four carrying cost components and add them.
•
Step Three: Divide the total costs calculated in Step
Two by the value of the item determined in Step One.
•
Interpret:The total cost to hold item
X as inventory for one year is ##.#% of that item's value.
note verified to pass 2026/2027
Demand management (7a) - correct answer "focused efforts to estimate and manage customers'
demand, with the intention of using this information to shape operating decisions."
- create greater value for the end-user.
- proven mechanism to minimize costs without reducing capacities
Demand Manager Threats (7a) - correct answer •Lack of coordination among departments (i.e.,
functional silos) results in little or no response coordination to demand data.
•Too much emphasis on demand forecasting, with less on collaborative efforts and plans that arrive
from forecasts.
•Demand information is used primarily for operational and tactical planning rather than for strategic
purposes.
Demand Forecasting (7a) - correct answer •The first major component of demand management is
forecasting product demand (amount, when, where).
•While many statistical techniques exist to forecast demand, in general, all forecasts will ultimately be
wrong (goal is to minimize the error between actual and forecasted demand).
Independent Demand (7a) - correct answer demand for the primary item or finished product
ex. demand for a bicycle
Dependent Demand (7a) - correct answer -is directly influenced by the demand for the independent
item
ex. bike tires because the number of tires demanded is determined by the number of bikes demanded
,Mean Squared Error (MSE): (7a) - correct answer Squares each period error so that the negative and
positive errors do not cancel one another out.
Mean Absolute Deviation (MAD): (7a) - correct answer Takes the absolute value of each error so the
negative and positive signs are removed and a good indication of average error per period is calculated.
•Mean Absolute Percent Error (MAPE): (7a) - correct answer Relates forecast error to level of demand
so different forecast types can be compared.
Internal Forecasting (7a) - correct answer •Sales & Operations Planning (S&OP) - Five Step Process
External Forecasting (7a) - correct answer •Collaborative Planning, Forecasting, and Replenishment
(CPFR)
Demand Imbalance (7a) - correct answer The need to manage supply-demand imbalances arises due to
demand fluctuation sources and the bullwhip effect. Four common approaches are categorized as
external or internal
Random Variable (7a) - correct answer -a development that cannot be anticipated and is usually the
cause to hold safety stock to avoid stockouts.
ex. hurricane that devastated parts of Louisiana caused an unexpected surge in the demand for building
supplies in that region.
Trend Variable (7a) - correct answer - gradual increase of decrease in demand over time for an
organization
Ex. Advanced electronics components in the consumer market is trending upwards.
Seasonal Variable (7a) - correct answer Ex. chocolate manufactures are normally faced with several
seasonal patterns during the year, such as Valentine's day, Easter, and Halloween.
, Business Cycle (7a) - correct answer Usually driven by nation's economy and can be growing, stagnant,
or declining. These patterns usually occur over a period of more than one year.
Anticipatory Stocks (9a) - correct answer Accumulated inventory to hedge against the risks that will
negatively impact its source of supply. (Examples Strikes, shortages, weather)
Seasonal Stocks (9a) - correct answer Generally challenged when determining how much
inventory to accumulate (Example: Agriculture)
Inventory Carrying Cost (ICC) (9a) - correct answer The costs that are incurred by inventory at rest and
waiting to be used. ICC is a ratio that describes the relationship between the cost of owning that
inventory item per year and the inventory value.
Interpretation of ICC
Step One: Determine the value of a particular item
that is stored in inventory (exclude in-transit & WIP).
•
Step Two: Determine the cost associated with each
of the four carrying cost components and add them.
•
Step Three: Divide the total costs calculated in Step
Two by the value of the item determined in Step One.
•
Interpret:The total cost to hold item
X as inventory for one year is ##.#% of that item's value.
