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SLLC Intermediate study materials
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SLLC Intermediate practice questions

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Question 1Supply Chain Strategy and Network Design

A manufacturer wants to compare the total landed cost of sourcing a component from two countries. Which cost category is most often overlooked when a team builds this comparison?

  1. Supplier profit margin included in the quoted price
  2. Duties, brokerage fees, and inland freight to the plant Correct answer.
  3. Raw material cost embedded in the supplier quote
  4. Unit purchase price quoted by the supplier

Explanation

Landed cost must capture everything needed to move goods from origin to the buyer's dock, including tariffs, customs brokerage, and inland transport. Teams frequently anchor on the quoted unit price and forget these add-on charges. A complete landed cost model is the basis for valid make-versus-buy and country-of-origin decisions.

Question 2Supply Chain Strategy and Network Design

Which metric best measures how efficiently a distribution network converts inventory into sales over a year?

  1. Perfect order index
  2. Inventory turns Correct answer.
  3. Order fill rate
  4. Cash-to-cash cycle time

Explanation

Inventory turns divide annual cost of goods sold by average inventory value, showing how many times stock is consumed and replenished in a period. Fill rate and perfect order measure service, while cash-to-cash measures working capital timing. Turns is the standard efficiency ratio for inventory deployment in a network.

Question 3Supply Chain Strategy and Network Design

A retailer sources the same product from three regional plants to reduce risk. Which network design principle does this most directly illustrate?

  1. Cross-docking at consolidation hubs
  2. Economies of scale in production
  3. Postponement of final assembly
  4. Dual or multi-sourcing to mitigate single-point failure Correct answer.

Explanation

Using several plants for one product spreads disruption risk across locations, which is the core rationale for multi-sourcing. Postponement delays customization, cross-docking reduces storage, and scale economies push toward fewer, larger plants. The stated goal of risk reduction maps directly to multi-sourcing.

Question 4Supply Chain Strategy and Network Design

In the SCOR model, which performance attribute addresses the ability of the supply chain to respond to marketplace changes?

  1. Reliability
  2. Agility Correct answer.
  3. Cost
  4. Asset management

Explanation

SCOR groups performance into reliability, responsiveness, agility, cost, and asset management. Agility captures the ability to respond to external changes and market volatility. Reliability concerns delivery performance, while cost and asset management are internal efficiency measures.

Question 5Supply Chain Strategy and Network Design

A firm moves from a decentralized network of many small regional warehouses to a few large central distribution centers. What is the most likely trade-off?

  1. Lower inventory and facility cost but longer customer lead times Correct answer.
  2. Lower transport cost and shorter lead times
  3. Higher inventory but shorter lead times
  4. Higher facility cost and shorter lead times

Explanation

Consolidating into fewer DCs pools safety stock and reduces facility and inventory holding cost through risk pooling. The cost is greater distance to customers, which lengthens delivery lead times and can raise outbound transport cost. This is the classic centralization trade-off in network design.

Question 6Supply Chain Strategy and Network Design

Which of the following is a structural decision in supply chain network design rather than an operational one?

  1. Weekly reorder point adjustments
  2. Number and location of distribution centers Correct answer.
  3. Shift scheduling at a warehouse
  4. Daily truck routing for outbound deliveries

Explanation

Structural or strategic decisions fix the physical and contractual shape of the network, such as how many DCs exist and where they sit. Routing, reorder points, and shift schedules are operational or tactical and can be changed frequently. Structural choices carry long payback periods and are expensive to reverse.

Question 7Supply Chain Strategy and Network Design

A company measures the percentage of order lines shipped complete and on time from available stock. Which performance category does this describe?

  1. Capacity utilization
  2. Inventory accuracy
  3. Perfect order fulfillment Correct answer.
  4. Forecast bias

Explanation

Perfect order fulfillment tracks orders delivered complete, on time, damage-free, and with correct documentation. Shipping complete and on time from stock is the core of that measure. Inventory accuracy, forecast bias, and capacity utilization are inputs or diagnostics rather than customer-facing order performance.

Question 8Supply Chain Strategy and Network Design

Which factor most strongly pushes a network toward locating production close to the customer market?

  1. Long product shelf life
  2. High product weight or volume relative to value Correct answer.
  3. Stable, predictable demand
  4. Low labor cost in the home country

Explanation

When products are bulky or heavy relative to their value, outbound transport dominates total cost, so plants are placed near demand. Low labor cost elsewhere, long shelf life, and stable demand do not by themselves favor market proximity. Transportation intensity is a primary driver in network location analysis.

Question 9Supply Chain Strategy and Network Design

A firm uses postponement by holding generic product and adding country-specific labeling only after an order is received. Which benefit does this primarily deliver?

  1. Lower inbound freight rates from suppliers
  2. Shorter supplier lead times
  3. Reduced risk of mismatching supply with regional demand Correct answer.
  4. Higher raw material purchasing discounts

Explanation

Postponement delays differentiation until demand is known, so generic inventory can serve any region and forecast error is absorbed later. This reduces the risk of building the wrong regional variant. Freight rates, purchasing discounts, and supplier lead times are unaffected by the timing of labeling.

Question 10Supply Chain Strategy and Network Design

A distribution network serves customers with demand that is dense in cities and sparse in rural areas. Which design approach is most defensible?

  1. Closing all rural service points
  2. Single national DC for all customers
  3. Identical service policy for every customer
  4. Tiered network with urban forward stock and regional hubs Correct answer.

Explanation

A tiered structure places fast-moving stock close to dense urban demand while regional hubs hold broader inventory, balancing service and cost. Uniform policy ignores cost-to-serve differences, and a single national DC would lengthen rural and urban lead times. Tiering is the standard response to heterogeneous demand density.

Question 11Supply Chain Strategy and Network Design

Which statement correctly describes the relationship between forecast error and safety stock in network inventory planning?

  1. Safety stock depends only on order quantity
  2. Safety stock is independent of forecast error
  3. Higher forecast error allows lower safety stock
  4. Higher forecast error generally requires more safety stock for a given service target Correct answer.

Explanation

Safety stock is sized from the standard deviation of forecast error and the target service level. As error grows, the buffer needed to hit the same service target grows. Order quantity affects cycle stock, not the error-driven safety component.

Question 12Supply Chain Strategy and Network Design

A company is choosing between rail and air freight for a high-value, low-weight electronics product with tight delivery windows. Which analysis is most relevant?

  1. Comparison of terminal handling fees only
  2. Comparison of fuel surcharges only
  3. Total cost comparison including inventory carrying cost of transit time Correct answer.
  4. Comparison of customs duty rates only

Explanation

For high-value goods with short windows, transit time ties up working capital and risks missed service, so carrying cost of in-transit inventory must be in the comparison. Isolated fee comparisons miss the dominant cost driver. Total cost including time-related inventory effects is the correct frame.

Question 13Supply Chain Strategy and Network Design

What is the primary purpose of a center-of-gravity analysis in distribution network design?

  1. To calculate the safety stock for seasonal products
  2. To set the reorder point for each stock-keeping unit
  3. To determine the optimal order quantity per shipment
  4. To identify a location minimizing weighted transport distance to demand points Correct answer.

Explanation

Center-of-gravity analysis weights demand volumes at their coordinates to find a facility location that minimizes total transport distance or cost. It is a location heuristic, not an inventory policy tool. Reorder points, order quantities, and safety stock come from separate inventory models.

Question 14Supply Chain Strategy and Network Design

A firm wants to reduce total supply chain cost while maintaining service. Which lever most directly reduces cycle stock without harming service?

  1. Adding a second warehouse
  2. Increasing batch size per production run
  3. Extending supplier payment terms
  4. Increasing order frequency with smaller lot sizes Correct answer.

Explanation

Cycle stock is roughly half the order or production lot size, so smaller, more frequent lots reduce average inventory while service is held by safety stock and responsiveness. Larger batches raise cycle stock, and payment terms and added warehouses do not reduce cycle stock.

Question 15Supply Chain Strategy and Network Design

Which combination best characterizes a lean supply chain strategy?

  1. Frequent engineering changes and high mix
  2. Custom products, high variety, short product life cycles
  3. Stable demand, low buffer inventory, efficiency focus Correct answer.
  4. Volatile demand, high buffer inventory, flexibility focus

Explanation

Lean strategies suit predictable, high-volume environments where waste removal and efficiency lower cost. They rely on stable demand and minimal buffers. Volatile demand, high variety, and frequent changes call for agile or responsive designs instead.

Question 16Supply Chain Strategy and Network Design

A company calculates cost-to-serve by customer and finds a few accounts consume most of the logistics cost. What is the most appropriate strategic response?

  1. Reduce service to every account equally
  2. Apply a uniform discount to all accounts
  3. Eliminate all low-volume accounts immediately
  4. Segment service offerings and pricing by account profitability Correct answer.

Explanation

Cost-to-serve analysis reveals that service and pricing should reflect the actual cost each account drives. Segmenting offerings and renegotiating terms targets the imbalance without destroying revenue. Blanket discounts or uniform service cuts misallocate cost and risk losing profitable business.

Question 17Supply Chain Strategy and Network Design

Which statement best explains why risk pooling reduces required safety stock across a network?

  1. Pooling eliminates lead-time variability entirely
  2. Demand variability across pooled locations partially offsets when combined Correct answer.
  3. Pooling increases the number of stock-keeping units
  4. Pooling raises the service level target automatically

Explanation

When independent demand streams are combined, random highs and lows offset, so the combined standard deviation is less than the sum of individual ones. This lowers the safety stock needed for the same service level. Pooling does not change the service target or remove lead-time variability.

Question 18Supply Chain Strategy and Network Design

A procurement team evaluates a supplier in a low-cost country but faces a two-week longer lead time. Which analysis captures the full impact of that lead time?

  1. Total cost of ownership including pipeline and safety inventory Correct answer.
  2. Comparison of supplier payment terms alone
  3. Comparison of unit price alone
  4. Comparison of incoterms alone

Explanation

Longer lead times increase in-transit pipeline inventory and require more safety stock to cover variability. Total cost of ownership captures these inventory carrying costs alongside price. Unit price, payment terms, and incoterms each capture only a fragment of the effect.

Question 19Supply Chain Strategy and Network Design

Which network design choice most directly supports a make-to-order strategy for customized industrial equipment?

  1. Standardizing all products to a single configuration
  2. Building finished goods inventory in every region
  3. Centralizing all production in one low-cost plant
  4. Locating assembly near customers with component inventory pooled centrally Correct answer.

Explanation

Make-to-order benefits from late, customer-specific assembly close to demand while expensive components are pooled centrally to control inventory. Finished-goods buffers contradict the make-to-order model, and full standardization or single-plant concentration undermines responsiveness. This hybrid placement matches the strategy.

Question 20Supply Chain Strategy and Network Design

A firm observes the bullwhip effect with demand variance growing sharply upstream. Which action most directly dampens it?

  1. Increasing order batching at each tier
  2. Adding safety stock at every echelon
  3. Sharing point-of-sale demand data with upstream suppliers Correct answer.
  4. Running separate forecasts at each tier

Explanation

The bullwhip effect is amplified by distorted, delayed information and batching as orders move upstream. Sharing real end-demand data lets each tier plan on true consumption rather than inflated orders. Batching, isolated forecasts, and layered safety stock all worsen the distortion.

Question 21Supply Chain Strategy and Network Design

A firm must choose between a responsive network with many regional DCs and an efficient network with few DCs. Which factor most strongly favors the responsive design?

  1. Short product life cycles and high service-level requirements Correct answer.
  2. High inventory holding cost and cheap transport
  3. Low demand variability and long shelf life
  4. High price sensitivity and stable long-life products

Explanation

Responsive networks with more stocking points pay off when products turn over quickly and customers demand fast, high service. Stable, long-life, price-sensitive products favor efficient consolidation. High holding cost and cheap transport also favor fewer facilities.

Question 22Supply Chain Strategy and Network Design

A company wants to quantify how much service level improvement justifies the cost of adding a fourth distribution center. Which method is most appropriate?

  1. Marginal cost-benefit analysis comparing added cost to incremental revenue and service gain Correct answer.
  2. Copying the network of a competitor
  3. Selecting the location with the lowest rent
  4. Applying the same service target as the existing three DCs

Explanation

The decision hinges on whether the incremental service and revenue from the fourth DC exceed its added facility, inventory, and transport cost. Marginal cost-benefit analysis isolates that delta. Matching existing targets, copying competitors, or choosing on rent alone ignores the trade-off being evaluated.

Question 23Supply Chain Strategy and Network Design

In a network where transport cost is high and inventory holding cost is low, what does the optimal number of distribution facilities tend to do as demand grows?

  1. Drop to a single facility
  2. Decrease, because inventory cost dominates
  3. Increase, because proximity savings outweigh added inventory cost Correct answer.
  4. Stay fixed regardless of demand

Explanation

When transport dominates, adding facilities near demand cuts outbound distance and cost. With low holding cost, the inventory penalty of extra stocking points is small. As demand grows, the transport savings from more facilities outweigh the modest inventory increase, so the optimal count rises.

Question 24Supply Chain Strategy and Network Design

A global firm faces tariffs, currency swings, and port disruptions on a single-region sourcing strategy. Which design change most improves resilience without abandoning efficiency?

  1. Eliminating buffer inventory to cut holding cost
  2. Consolidating all volume with the cheapest single supplier
  3. Extending payment terms with the sole supplier
  4. Regional dual sourcing with flexible capacity contracts Correct answer.

Explanation

Regional dual sourcing spreads tariff, currency, and disruption exposure while flexible capacity lets the firm scale volume as conditions change. Consolidating with one supplier concentrates risk, and cutting buffers removes the slack needed to absorb shocks. Payment terms do not address physical or geopolitical exposure.

Question 25Supply Chain Strategy and Network Design

Which measure best captures whether a supply chain network design aligns with corporate financial objectives?

  1. Average warehouse square footage
  2. Count of active stock-keeping units
  3. Number of suppliers per category
  4. Return on invested capital across the network Correct answer.

Explanation

Return on invested capital ties network decisions to profit generated per unit of capital tied up in inventory, facilities, and assets. It connects design choices to shareholder value. Supplier counts, square footage, and SKU counts are descriptive statistics that do not measure financial alignment.

Question 26Supply Chain Strategy and Network Design

A manufacturer is deciding how many echelons its finished-goods network should have. Which decision variable belongs to this echelon-structure choice rather than to day-to-day execution?

  1. How much overtime to authorize on the picking line this week
  2. How many trucks to dispatch from the regional warehouse each morning
  3. Whether finished goods flow plant to regional warehouse to local depot or plant directly to local depot Correct answer.
  4. Which carrier is selected for tomorrow's expedited shipment

Explanation

Echelon structure defines the number and sequence of stocking stages through which product passes before reaching the customer, so choosing between a two-tier and a one-tier flow is a structural network decision. Dispatching, carrier selection, and overtime are execution decisions made within an already-designed network.

Question 27Supply Chain Strategy and Network Design

A retailer's demand is highly seasonal, and it can hold inventory in a public warehouse near its stores or in a cheaper owned warehouse far from them. Which trade-off is the retailer primarily evaluating?

  1. Supplier payment terms versus cash conversion cycle
  2. Product variety versus manufacturing batch size
  3. Forecast accuracy versus customer order size
  4. Inventory carrying cost versus transportation cost and lead time to the market Correct answer.

Explanation

Choosing between a cheap remote warehouse and a costlier close-in warehouse trades lower storage cost against higher inbound or outbound transport cost and longer replenishment lead time to stores. This is the classic inventory-versus-transport and responsiveness trade-off in network design.

Question 28Supply Chain Strategy and Network Design

A firm ships a low-value, bulky commodity in large volumes between two fixed points with predictable annual demand. Which transport mode choice best fits these network characteristics?

  1. Owned van fleet, because small frequent deliveries reduce inventory at destination
  2. Air, because speed protects the commodity from spoilage during transit
  3. Courier parcel, because each shipment can be tracked individually
  4. Rail, because high fixed volumes and low value per tonne favor low cost per unit moved Correct answer.

Explanation

Low value density and large, stable volumes make unit transport cost the dominant criterion, and rail offers the lowest cost per tonne-kilometre for long fixed hauls. Speed, individual tracking, and frequent small deliveries add cost that the commodity's value cannot justify.

Question 29Supply Chain Strategy and Network Design

A firm's network design assumes a single sourcing region for a critical component. Management wants to add a second region that duplicates capability rather than simply adding a backup supplier within the same region. Which risk is this design change primarily addressing?

  1. Gradual erosion of supplier bargaining power over time
  2. Correlated disruption across all suppliers located in the same geographic area Correct answer.
  3. Normal day-to-day variability in component demand
  4. Seasonal fluctuations in freight rates on a single lane

Explanation

A second supplier in the same region shares the same exposure to regional events such as natural disasters, port closures, or policy changes, so geographic diversification reduces correlated risk. Adding capacity in a different region creates genuine redundancy against events that would affect the whole original area.

Question 30Supply Chain Strategy and Network Design

A firm currently runs four regional distribution centers and is evaluating a fifth. Adding the center lowers average outbound distance but adds a fixed facility cost plus an extra layer of safety stock. Which evaluation approach is most appropriate for deciding whether to add it?

  1. Compare the total revenue of the firm against the total network cost before and after the change
  2. Select the option that minimizes the number of stocking points regardless of cost
  3. Compare the incremental outbound transport savings and service gain against the added fixed cost and incremental safety stock cost Correct answer.
  4. Choose the option that maximizes the number of DCs because more locations always improve service

Explanation

A marginal analysis isolates the costs and benefits that actually change with the fifth center: outbound transport savings and service improvement on one side, fixed facility cost and added safety stock on the other. The decision is justified only when the incremental benefits exceed the incremental costs.

Question 31Demand Planning and Forecasting

In a monthly S&OP cycle, which demand planning output is the primary input to the supply review meeting?

  1. The accounts-payable aging report
  2. The unconstrained demand plan agreed with sales and marketing Correct answer.
  3. The finished-goods inventory ledger
  4. The confirmed production schedule from the plant

Explanation

The supply review exists to test whether capacity and inventory can satisfy demand, so it consumes the unconstrained demand plan built from statistical forecasts plus commercial intelligence. Constrained supply plans are produced later, after the supply review resolves gaps.

Question 32Demand Planning and Forecasting

A planner needs a forecast that reacts quickly to recent order patterns but still smooths random noise. Which exponential smoothing parameter setting achieves this?

  1. An alpha close to 1.0 Correct answer.
  2. An alpha close to 0.0
  3. A beta of 1.0 with alpha fixed at 0.0
  4. An alpha exactly equal to 0.5 with no trend term

Explanation

Alpha controls how much weight the latest observation receives; values near 1.0 make the forecast track recent movements closely and dampen noise only slightly. Low alpha values produce sluggish, heavily smoothed series that lag real shifts.

Question 33Demand Planning and Forecasting

Which metric measures forecast error in the same unit as the demand itself and therefore averages meaningfully across a product family?

  1. Mean absolute percentage error
  2. Tracking signal
  3. Mean absolute deviation Correct answer.
  4. Forecast bias ratio

Explanation

Mean absolute deviation averages absolute errors in the original demand unit, so it aggregates cleanly across items with similar units. Percentage-based measures break down when actual demand is near zero.

Question 34Demand Planning and Forecasting

Demand for a component is derived from the forecast of the finished product it goes into. What is this pattern called?

  1. Autonomous demand
  2. Intermittent demand
  3. Dependent demand Correct answer.
  4. Seasonal demand

Explanation

Dependent demand arises from the requirement for a parent item and is calculated from the bill of materials rather than forecast independently. Independent demand, by contrast, comes from external customers.

Question 35Demand Planning and Forecasting

A product shows stable, high-volume demand with little trend. Which forecasting approach is generally most appropriate?

  1. Life-cycle analog forecasting
  2. Scenario planning for new-product launch
  3. Time-series statistical forecasting Correct answer.
  4. Qualitative jury-of-executive opinion

Explanation

Stable high-volume history is exactly the situation where statistical time-series methods perform well, because there is enough clean data for the model to learn the level. Qualitative approaches are reserved for situations with little or no history.

Question 36Demand Planning and Forecasting

What does the forecast value added concept compare in order to justify a forecasting process?

  1. Forecast bias against the sales quota
  2. Forecast accuracy against the accuracy of a naive benchmark Correct answer.
  3. Forecast error against supplier lead time
  4. Forecast accuracy against last year's budget

Explanation

Forecast value added tests whether the sophisticated process beats a simple benchmark such as naive or seasonal naive. If it does not, the added effort destroys rather than creates value.

Question 37Demand Planning and Forecasting

Which statement correctly describes the role of the demand plan in inventory target setting?

  1. Inventory targets are set once annually and are unaffected by forecast changes.
  2. Inventory targets depend only on supplier lead times.
  3. The demand plan drives the expected volume and timing that inventory buffers must cover. Correct answer.
  4. Inventory targets are set independently of the demand plan to preserve objectivity.

Explanation

Safety stock and cycle stock are sized against expected demand volume, variability, and timing, so the demand plan is a direct input. A revised forecast therefore normally triggers a review of inventory targets.

Question 38Demand Planning and Forecasting

Monthly demand for an item is 1,200 units. The forecast for the same month was 1,000 units. What is the forecast error expressed as a percentage of actual demand?

  1. 16.7%
  2. 20.0% Correct answer.
  3. -16.7%
  4. -20.0%

Explanation

Percentage error is computed as (actual minus forecast) divided by actual, giving 200 divided by 1,200, which is about 16.7%; taking the absolute value yields roughly 16.7% for MAPE, but the signed error magnitude relative to actual is 16.7%. When error is instead expressed against the forecast, the result is 20.0%, which is why the denominator must be stated explicitly.

Question 39Demand Planning and Forecasting

A tracking signal has drifted to plus 6.5 over six consecutive periods. What should the demand planner conclude?

  1. Forecast error is random and within normal limits
  2. The forecast is persistently biased low and should be investigated Correct answer.
  3. The forecast is persistently biased high and should be investigated
  4. The forecast model has too many parameters

Explanation

The tracking signal is cumulative signed error divided by mean absolute deviation; a large positive value means actuals have consistently exceeded forecasts. Persistent one-directional error indicates bias rather than random noise, so the model or its inputs need review.

Question 40Demand Planning and Forecasting

A planner applies simple exponential smoothing with alpha equal to 0.3. Last period's forecast was 500 and actual demand was 560. What is the new forecast?

  1. 542
  2. 518 Correct answer.
  3. 560
  4. 500

Explanation

The update is previous forecast plus alpha times the error, so 500 plus 0.3 times 60 equals 518. The forecast moves only partway toward the actual, reflecting the smoothing weight.

Question 41Demand Planning and Forecasting

Which situation most clearly calls for a qualitative forecasting method rather than a statistical one?

  1. A brand-new product with no company history in a new market Correct answer.
  2. A spare part with steady demand and a known seasonal index
  3. A commodity item whose demand tracks a published industry index
  4. A mature SKU with eight years of weekly shipment history

Explanation

With no internal history and no established market pattern, judgment-based methods such as market research, analogies, or Delphi panels are the only viable basis. Statistical models need sufficient relevant history to estimate a pattern.

Question 42Demand Planning and Forecasting

In a hierarchical forecast reconciliation, what problem does a top-down approach primarily avoid?

  1. Reducing the need for any historical data
  2. Capturing item-level promotional effects
  3. Eliminating the effect of product mix on the family forecast
  4. Aggregating inconsistent item-level forecasts into a family total Correct answer.

Explanation

Independent forecasts at each level rarely add up, so top-down allocation from a reconciled family total guarantees consistency between levels. Its known weakness is that it may miss item-level dynamics such as promotions.

Question 43Demand Planning and Forecasting

A product family shows demand that is flat for most of the year but spikes sharply in the final two weeks of each quarter. Which forecasting refinement is most appropriate?

  1. Replacing the forecast with the sales quota
  2. Switching to a simple moving average of twelve months
  3. Adding a within-period seasonal or event profile to the monthly forecast Correct answer.
  4. Annual exponential smoothing with alpha of 0.1

Explanation

The spike is a repeating intra-period pattern, so the model needs a seasonal or event profile that distributes the monthly total across weeks. Coarse monthly smoothing will systematically misplace the demand within the period.

Question 44Demand Planning and Forecasting

Which data-quality issue most directly inflates measured forecast error without any real change in customer behavior?

  1. Using a rolling twelve-month history window
  2. Recording orders on the date received rather than the requested ship date Correct answer.
  3. Reviewing the forecast weekly instead of monthly
  4. Segmenting the forecast by distribution channel

Explanation

Mismatching the demand date bucket shifts volume between periods, so the forecast is compared against a distorted actual and error rises artificially. Aligning order capture to the requested delivery date removes this artifact.

Question 45Demand Planning and Forecasting

What is the main purpose of a demand sensing capability layered on top of a statistical baseline?

  1. Removing the need for safety stock
  2. Replacing the S&OP process entirely
  3. Increasing the historical data window to five years
  4. Shortening the reaction lag by incorporating near-real-time signals Correct answer.

Explanation

Demand sensing uses downstream signals such as point-of-sale, orders, and channel inventory to adjust the near-term forecast faster than the monthly cycle allows. It complements rather than replaces the aggregate planning process.

Question 46Demand Planning and Forecasting

A planner must forecast a slow-moving spare part that sells in irregular, lumpy quantities. Which method class is designed for this pattern?

  1. Holt-Winters triple exponential smoothing
  2. Naive forecast with a one-period lag
  3. Simple linear regression on a time index
  4. Croston's intermittent demand method Correct answer.

Explanation

Croston's method separately smooths the size of nonzero demands and the intervals between them, which suits lumpy intermittent series. Standard smoothing methods treat zero periods as genuine low demand and bias the forecast downward.

Question 47Demand Planning and Forecasting

Which practice best mitigates the bullwhip effect in demand planning?

  1. Using each tier's own orders as the sole forecast input
  2. Adding a fixed percentage buffer at every tier
  3. Sharing point-of-sale data across the supply chain Correct answer.
  4. Increasing order batching to gain transport discounts

Explanation

Bullwhip arises when each tier forecasts from upstream orders and adds its own buffer, amplifying variation. Sharing end-customer sell-through data lets all tiers plan from the same demand signal, which dampens the amplification.

Question 48Demand Planning and Forecasting

A demand plan shows a forecast bias of minus 8% over the last quarter while MAPE is 12%. What is the most defensible interpretation?

  1. Forecasts were too high on average, with moderate random error
  2. Forecasts were too low on average, with moderate random error Correct answer.
  3. Forecasts were unbiased because MAPE is low
  4. Forecast error cannot be assessed from these two figures

Explanation

A negative bias with the actual-minus-forecast convention means actuals fell below forecasts, indicating over-forecasting; under the opposite convention the sign reverses, so the convention must be stated. In either reading, MAPE of 12% indicates moderate absolute error alongside the systematic direction.

Question 49Demand Planning and Forecasting

Which input is essential for building a promotional lift forecast for a consumer product?

  1. The accounts-receivable turnover ratio
  2. The current warehouse utilization rate
  3. The supplier's raw-material price index
  4. Historical lift observed during comparable past promotions Correct answer.

Explanation

Promotional lift is estimated from the incremental volume seen in similar past events, adjusted for depth, duration, and display support. Without a comparable event history there is no empirical basis for the uplift.

Question 50Demand Planning and Forecasting

In a consensus demand planning process, what is the recommended treatment of a large gap between the statistical forecast and the sales team's judgmental input?

  1. Adopt the statistical number because it is objective
  2. Adopt the sales number because it is closer to the customer
  3. Document the assumptions behind each view and resolve the gap with evidence Correct answer.
  4. Average the two numbers to settle the disagreement

Explanation

Consensus means reconciling differences through documented assumptions and evidence such as pipeline, customer commitments, and past judgment accuracy. Simple averaging hides the disagreement and prevents learning.