If a forecast consistently overestimates demand, what might happen?

Question

BlackTom AI · Accepted Answer

When forecasting demand, the accuracy of the forecast directly influences ordering decisions and inventory levels. 
Option 1: 'Stockouts' would be more likely if the forecast underestimates demand or is erratic; with a consistent overestimate, stockouts are unlikely because you’re ordering more than needed. 
Option 2: 'No effect' ignores the clear link between forecast bias and inventory outcomes; in practice, a systematic overestimate changes orders and storage pressures, so this choice is inaccurate. 
Option 3: 'Excess inventory and higher holding costs' aligns with the expectation that overestimating demand causes larger purchase quantities or production runs, leading to surplus stock and increased costs for storing or obsolescence. 
Option 4: 'Perfect matching of supply and demand' is unrealistic in real-world forecasting; a consistent overestimate inherently creates a mismatch by over-forecasting demand, so this option is incorrect. 
In summary, the most plausible consequence of consistently overestimating demand is carrying excess inventory and incurring higher holding costs, while the other options describe outcomes more typical of underestimation or idealized scenarios.

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If a forecast consistently overestimates demand, what might happen?

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MGS*3100*W10 25 Fall OM Final - Requires Respondus LockDown Browser

If a forecast consistently overestimates demand, what might happen?

View Explanation

Log in for full answers

Similar Questions

Question at position 2 Which of the following best describes long-term planning?Highly detailed, specific, and reactiveFocused on individual customers or itemsCentrally concerned with adjusting daily tasksFocused on forecasting aggregated demand

In these slides, why do we build a distribution from A/F ratios to be used in computing Q*?

Which of the following sequence is correct?

What HRM activity would a manager perform to define staffing needs to meet future production goals?

Demand forecasting is an important component of a manufacturing company’s demand-supply management. The accuracy of the demand forecasts for all their lines of products:

Question at position 11 The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services is known as?Cause and EffectTime SeriesDemand PlanningForecasting

Question at position 9 The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services is known as Collaborative Planning, Forecasting, and ReplenishmentTrueFalse

Forecasting in a supply chain is important because it:

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MGS3100W10 25 Fall OM Final - Requires Respondus LockDown Browser