Supply Chain Management

Answer: A - Long-term forecasts are usually less accurate than short-term forecasts because long-term forecasts have a larger standard deviation of error relative to the mean than short-term forecasts. For example, suppose a general store manager places an order by 11 A.M. to be delivered by 8 P.M the same day. The manager has a forecast of what will sell less than 13 hours before the actual sale. The short lead-time allows the manager to take into account current information, such as weather, which could affect product sales. This forecast is likely to be more accurate than if the store manager had to forecast demand a week in advance.