CPIM Practice Exam

In forecasting, which of the following is a key component of Deseasonalized Demand?

1. Leading indicators

2. Seasonal Index

3. Time buckets

4. Expert opinions

The correct answer is: Seasonal Index

Deseasonalized demand refers to the demand pattern that has been adjusted to eliminate the effects of seasonality, allowing for more accurate forecasting. A key component in this process is the Seasonal Index. The Seasonal Index helps to quantify the seasonal fluctuations in demand by providing a numerical representation of how much higher or lower the demand is during specific seasons compared to the average demand over a period. When deseasonalizing data, the actual demand figures are divided by the corresponding Seasonal Index values to derive a clearer picture of the underlying demand trends without the influence of seasonal variations. This allows forecasters to identify patterns and make predictions based on the core demand behavior, unaffected by seasonal peaks or troughs. Leading indicators, while useful in forecasting, relate more to upcoming trends rather than the adjustments necessary for seasonality. Time buckets are often used in time-series analysis to group data but are not directly tied to the deseasonalization process. Expert opinions can contribute valuable insights, yet they do not form a systematic part of the deseasonalization methodology. Thus, the Seasonal Index is indeed a fundamental element in the effective application of deseasonalized demand forecasting.