Practice Quiz

Supply Chain Management

Category - Demand

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Observed demand (O) = ____________________+______________________.
  1. Aggregated; random.
  2. Systematic; random.
  3. Aggregated; constant.
  4. Constant; systematic.
Explanation
Answer: B - In time series methods, when a company attempts to forecast demand based on history, then the historical demand, growth patterns, and any seasonal patterns will influence the forecast. With this method there is always a random element that cannot be explained by historical demand patterns. Therefore any observed demand can be broken down into a Systematic (S) and Random (R) component, i.e. O=S + R.
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