Certified Supply Chain Professional (CSCP) Practice Exam

How is seasonality defined in demand forecasting?

1. Constant demand throughout the year

2. Demand that fluctuates depending on the time of year

3. Predictable long-term trends

4. Demand influenced by economic cycles

The correct answer is: Demand that fluctuates depending on the time of year

Seasonality in demand forecasting refers to the variations in demand that occur at specific times of the year, often in a predictable manner. This can manifest as increased sales during particular seasons, holidays, or events, which can lead to peaks and troughs in demand that correspond to those time frames. For example, retail businesses often see heightened demand during the holiday season, while certain products, like air conditioners or winter clothing, have strong seasonal patterns based on climate changes. The characteristic of seasonality is its predictable nature, which allows companies to prepare and adjust their inventory and production levels accordingly. This is essential for businesses to maximize resources for peak demand times and minimize inventory costs during slower periods. Other definitions, such as constant demand throughout the year, predictable long-term trends, or demand influenced by economic cycles, do not encapsulate the essence of seasonality. Constant demand indicates no variability, which contradicts the concept of seasonality. Predictable long-term trends relate to shifts over an extended period rather than the cyclical nature of seasonal demand. Similarly, economic cycles impact demand but do not specifically define seasonal variations, which are more closely tied to time-based patterns occurring within a year.