Certified Supply Chain Professional (CSCP) Practice Exam

What does a negative result indicate when comparing actual demand to forecast?

1. Demand exceeds forecast

2. Demand equals forecast

3. Actual demand was less than forecast

4. Forecast results in stockouts

The correct answer is: Actual demand was less than forecast

When comparing actual demand to forecasted demand, a negative result indicates that actual demand was less than what was forecasted. This negative difference suggests that the company had anticipated higher demand than what was actually observed, which can have several implications for inventory management, production scheduling, and supply chain responsiveness. Understanding this discrepancy is crucial for supply chain professionals as it may necessitate adjustments in future forecasts and inventory strategies to avoid overproduction or excess inventory holding. It also highlights the importance of data accuracy and responsive forecasting methods that can adapt to actual market conditions. In contrast, instances where demand exceeds forecast would show a positive result, while a scenario where demand equals forecast would yield a zero result. Additionally, forecasts resulting in stockouts indicate a mismatch between supply and demand, often driven by either inaccurate forecasting or insufficient production capacity, rather than simply comparing values.