What is error variance in SAP CA-DDF-RT - Demand Data Foundation for Retail?

SAP Term: error variance

• Component: CA-DDF-RT

• Component Name: Demand Data Foundation for Retail

• Description: The variance of the difference between the model fit or mean forecast and the actual observation. The forecasted error variance is used to calculate quantile forecasts and safety stocks in replenishment.

Smart SAP Assistant

• Key Concepts: 
  Error variance is a measure of the difference between the actual demand and the forecasted demand in SAP's Demand Data Foundation for Retail (CA-DDF-RT). It is calculated by taking the sum of the squared differences between the actual and forecasted demand values. The error variance is used to evaluate the accuracy of a forecast and can be used to identify areas where improvements can be made. 
  
  How to use it: 
  Error variance can be used to compare different forecasting models and determine which one is most accurate. It can also be used to identify trends in demand that may not have been previously identified. Additionally, it can be used to identify areas where improvements can be made in order to increase accuracy. 
  
  Tips & Tricks: 
  When using error variance, it is important to remember that it is only one measure of accuracy and should not be used as the sole indicator of a forecast's accuracy. Additionally, it is important to consider other factors such as seasonality and trend when evaluating a forecast's accuracy. 
  
  Related Information: 
  Error variance is closely related to other measures of accuracy such as mean absolute error (MAE) and mean squared error (MSE). Additionally, it is related to other forecasting techniques such as exponential smoothing and ARIMA models.