A manufacturer can simplify the forecasting process by pooling demand forecasts for a product group and then:

A manufacturer can simplify the forecasting process by pooling demand forecasts for a product group and then:

A. averaging total demand and spreading it evenly across all items.

B. disaggregating demand to the item level based on marketing input.

C. disaggregating demand to the item level based on historical proportions.

D. allocating demand to each production site.

View Answer

Answer: C

Explanation:

Simplifying the forecasting process by pooling demand forecasts for a product group and then disaggregating demand based on historical proportions is an effective approach. Here’s how it works: Aggregate Forecasting: Start by forecasting the total demand for the entire product group, which tends to be more accurate than forecasting for individual items due to the law of large numbers.

Historical Proportions: Use historical sales data to determine the proportion of total demand attributed to each item within the group.

Disaggregation: Apply these historical proportions to the aggregate forecast to estimate the demand for each individual item.

Adjustments: This approach can be fine-tuned based on recent trends, market conditions, or changes in customer preferences.

By leveraging historical data to disaggregate demand, the process becomes more manageable and

can improve the accuracy of item-level forecasts.

Reference: Chase, C. W. (2013). Demand-Driven Forecasting: A Structured Approach to Forecasting. John Wiley & Sons.

Mentzer, J. T., Moon, M. A., & Smith, C. D. (2004). Sales Forecasting Management: A Demand Management Approach. SAGE Publications.