CPIM Practice Exam

What is typically done before choosing a forecasting technique?

1. Gathering and visualizing the data

2. Determining the process

3. Setting the level of aggregation

4. Testing historical data

The correct answer is: Gathering and visualizing the data

Gathering and visualizing the data is a crucial initial step before selecting a forecasting technique because it allows the forecaster to understand the underlying patterns, trends, and anomalies present in the data. By examining the data visually, one can identify seasonality, cyclical behaviors, and outliers that may influence the forecasting method selected. This understanding is essential in determining which forecasting techniques may be most suitable for the specific data set. Once the data is gathered and visualized, it sets a solid foundation for an informed decision on the forecasting approach. Effective visualization helps convey the key characteristics of the data clearly, which in turn aids in the clarity of the subsequent steps like setting the level of aggregation, determining the process, or testing historical data. Therefore, the process of gathering and visualizing data is vital for a successful forecasting endeavor.