Certified Supply Chain Professional (CSCP) Practice Exam

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Prepare for the Certified Supply Chain Professional (CSCP) Exam with an interactive quiz that assesses your knowledge through flashcards and multiple-choice questions. Each question includes hints and detailed explanations to reinforce your learning and help you get ready for the test.

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What does negative standard deviation signify in terms of demand?

Demand equals forecast
Demand is less than forecast (overstock)
Demand is higher than forecast (stockout)
No clear indication of demand

The correct answer is: Demand is less than forecast (overstock)

Standard deviation is a statistical measure that reflects the amount of variation or dispersion in a set of values. In the context of demand forecasting, a negative standard deviation does not directly make sense, as standard deviation, by definition, can only be zero or a positive value. However, interpreting the implications of demand variability in a broader sense, if you received a negative value in practical applications, it might suggest that the forecasted demand is fundamentally flawed, leading to consistent discrepancies. The reasoning may imply that actual demand consistently falls below what has been predicted—in other words, there is systematic overstock or a consistent expectation that is not being met by real demand. Thus, when considering demand compared to forecasts, experiencing a scenario of surplus stock arising from demand being consistently less than what was anticipated would lead you to conclude that the company is overstocking items, unable to sell at the expected rates informed by the forecast.