MGSC 395 EXAM 3 Questions With Verified Answers

For what organizational decisions are demand forecasts used? - Answer -long term(general forecast) -intermediate term(product family/service lines) -short term(detailed) What are the costs/risks of forecasts that are too high or too low? - Answer Too high: -surplus of inventory -price markdown(blackfri.) -too many employees Too low: Not enough.. -product for demand -people working(bad customer service) What are characteristics of all forecasts? - Answer -ALL wrong to some degree -"aggregate" are more accurate -"short-term" more accurate What are the different types of demand patterns? What are examples of products for each type? - Answer Time series 1. Horizontal: most simple/easy to predict(Soap/diapers) 2. Trend: gradual shift to hi/lo value over time(USC attendance) 3. Seasonal: recurring patterns over time. ALWAYS fixed amount of time(air conditioning) 4. Cyclical: alternating sequence above or below trend line that lasts longer than 1 yr. 5.Random What are the demand management methods used to cope with demand patterns?(5) - Answer -Complementary product:(similar resource/diff demand) -Promotional pricing(snowblower discount in spring) -Appointments(less uncertainty regarding resources needed) -Backlog(future date of creation to give time to restock) -Revenue Mgmt(varying price at the right time for different customer segments) How is forecast error measured? - Answer =Actual demand - Forecast How do you compute and interpret the various metrics for assessing forecast error? - Answer Measures that examine bias and variability(consistency of favor to one side and is it precise) What are judgement methods of forecasting?(4) How should they be used? - Answer They use contextual knowledge gained through experience -salesforce estimates -executive opinion -market research -delphi method(gaining consensus from group) When an adequate history file isn't available When should causal methods be used? How is the output used to forecast? What does r^2 tell us about the forecast? - Answer Predict demand using historical data on independent variables -used when you want to show causation -Regression R^2 tells us amount of variability(closer to 1=more confident;stronger relationship) - Answer Better processes=better forecasts -bias is worst FE -Aggregate levels -improve accuracy to reduce error