Practice Quiz

Supply Chain Management

Category - Demand

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Aggregate forecasts are more accurate because:
  1. They tend to have greater standard deviation of error relative to the mean.
  2. They tend to have a smaller standard deviation of error relative to the mean.
  3. They tend to have an equal standard deviation of error relative to the mean.
  4. They tend to have zero standard deviation of error relative to the mean.
Explanation
Answer: B - Aggregate forecasts are usually more accurate than disaggregate forecasts as they tend to have a smaller standard deviation of error relative to the mean. For example it is easy to forecast the Gross Domestic Product (GDP) of the United States for a given year with less than 3% error than it is to forecast the revenue for a given product.
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