CPIM Practice Exam

How should the alpha smoothing constant be adjusted if there is an upward trend in demand and the forecast results are widening?

1. Increase the alpha smoothing constant.

2. Make no change to the alpha smoothing constant.

3. Decrease the alpha smoothing constant.

4. Eliminate the alpha smoothing constant.

The correct answer is: Increase the alpha smoothing constant.

When there is an upward trend in demand and the forecast results are widening, it is important to make adjustments that allow the forecast system to respond more effectively to changes in the data. Increasing the alpha smoothing constant enhances the forecast’s responsiveness to recent demand trends. A higher alpha means that the model gives more weight to the most recent observations, which is critical when demand is trending upwards. By placing greater emphasis on recent data, the forecast can better capture and reflect the ongoing upward trend, thus reducing the widening of forecast results. This adjustment improves the accuracy of predictions and helps align the forecast more closely with actual demand, making it a strategic choice in forecasting scenarios characterized by changing trends. In contrast, making no changes, decreasing the constant, or eliminating it altogether would not adequately address the widening forecast gap in the presence of an upward trend and could result in less accurate forecasts.