CPIM Practice Exam

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Prepare for the CPIM Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

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Which formula represents the New Forecast calculation?

α * Last Demand + (1-α) * Last Demand
(α * Last Demand) + ((1-α) * Last Demand)
(α * Last Demand) + ((1-α) * Last Forecast)
Last Forecast + Last Demand/2

The correct answer is: (α * Last Demand) + ((1-α) * Last Forecast)

The New Forecast calculation is represented by the formula that combines the last forecast with the most recent demand to create a more accurate forecast for future periods. In this context, the correct formula is structured as the weighted sum of the last demand and the last forecast, where α (alpha) represents a smoothing constant between 0 and 1. The correct choice indicates that the new forecast is derived by taking a portion of the last demand, weighted by α, and adding it to a portion of the last forecast, weighted by (1-α). This approach reflects the principle of exponential smoothing, where more importance is given to the most recent demand while still considering the previous forecast to smooth out fluctuations and provide a more stable forecast. By using this method, if demand varies significantly, the system can adapt quickly because of the higher weight on the last demand. Conversely, if demand is stable, the last forecast can remain a strong predictor because it is also considered in the calculation. This balancing act between recent and historical estimates ensures that the forecast remains relevant and adjusts according to changing demand patterns.