Question

Select ALL of the following that are ways to reduce or mitigate the impact of forecast errors. a. Reduce the lead time over which forecasts are required to reduce the forecast error. b. Build more flexibility into the operations and the supply chain. c. Develop a better forecasting method. d. Add safety stock to the forecast to make sure that the forecast is high enough.

Answer 1

Answer: A. Reduce the lead time over which forecasts are required to reduce the forecast error.

B. Build more flexibility into the operations and the supply chain.

C. Develop a better forecasting method.

Explanation: Forecasting is the process of making predictions of the future based on past and present data and most commonly by analysis of trends.

A commonplace example might be an estimation of some variable of interest at some specified future date. Prediction is a similar, but more general term.

A forecast error is the difference between the actual or real and the predicted or forecast value of a time series or any other phenomenon of interest. By convention, the error is defined using the value of the outcome minus the value of the forecast.