CPIM Practice Exam

What does combining statistical forecasting with judgment achieve in demand planning?

1. The elimination of all risks in the supply chain

2. Construction of accurate demand estimates for products

3. Reduction of production lead times

4. Streamlined supplier negotiations

The correct answer is: Construction of accurate demand estimates for products

Combining statistical forecasting with judgment significantly enhances the accuracy of demand estimates for products. Statistical forecasting relies on historical data and quantitative methods to predict future demand, providing a solid foundation based on trends and patterns. However, it can fall short when unexpected market changes or qualitative factors are involved, such as shifts in consumer preferences or economic fluctuations. By integrating judgment into the forecasting process, decision-makers can account for these qualitative aspects, incorporating insights from market research, expert opinions, and current events that statistical models might not capture. This blend allows for a more nuanced understanding of demand, resulting in demand estimates that are not only data-driven but also contextually relevant. In doing so, organizations can better align their production and inventory levels with actual market needs, leading to improved service levels and reduced excess inventory. Other options, while relevant in the supply chain context, do not specifically capture the direct outcome of combining statistical forecasting with judgment in the demand planning process. Reducing risks, decreasing lead times, and streamlining negotiations are important goals but stem from improved accuracy and responsiveness to demand rather than being the direct result of the combination of forecasting methods.