Certified Supply Chain Professional (CSCP) Practice Exam

What do demand risks primarily involve?

1. Supplier bankruptcy

2. Natural disasters

3. Forecasting errors

4. Error in inventory management

The correct answer is: Forecasting errors

Demand risks primarily involve forecasting errors because they pertain to the uncertainty in predicting customer demand for products or services. Accurate demand forecasting is crucial for supply chain management, as it directly impacts inventory levels, production schedules, and overall operational efficiency. When forecasts are inaccurate, organizations may either overestimate or underestimate the demand, leading to excess inventory or stockouts. This misalignment can result in lost sales, increased holding costs, and dissatisfied customers, all of which highlight the importance of accurate demand forecasting in managing demand-related risks. The connection between forecasting and demand risk makes the correct choice particularly relevant in the context of supply chain management.