CPIM Practice Exam

What does an upward trend in demand indicate regarding the adjustment of forecasting methods?

1. Decrease the smoothing constant.

2. Increase accuracy of previous forecasts.

3. Adjust methods to account for the trend.

4. Ignore any changes in trends.

The correct answer is: Adjust methods to account for the trend.

An upward trend in demand signifies a consistent increase over time, suggesting that the forecasting methods need to be adapted to accurately reflect this changing pattern. By adjusting methods to account for the trend, businesses can ensure that their forecasts align more closely with actual future demand, leading to better inventory management, staffing, and financial planning. This adjustment could involve using trend-adjusted forecasting techniques or integrating more dynamic forecasting models that account for historical trends. Other choices would not effectively address the implications of an upward trend. Decreasing the smoothing constant could lead to forecasts that are less responsive to actual demand changes. Increasing the accuracy of previous forecasts doesn’t address the need for adjustment; rather, it simply aims at fixing past mistakes. Ignoring changes in trends would lead to outdated forecasts that do not capture the new demand dynamics, potentially resulting in inadequate supply or service levels. Thus, the correct approach emphasizes the importance of adjusting forecasting methods to reflect current market conditions accurately.