What is ordinary least squares in SAP SCM-APO-FCS - Demand Planning?

SAP Term: ordinary least squares

• Component: SCM-APO-FCS

• Component Name: Demand Planning

• Description: Ordinary least squares regression is a linear approach to multiple regression that eliminates the error term ei by squaring the error terms to create a Best Linear Unbiased Estimate BLUE. This method has some very attractive statistical properties that have made it one of the most popular methods of regression analysis. uses the ordinary least squares method to do multiple linear regression. Ordinary least squares regression may be a linear modeling approach, but many times it works in situations where the data is non-linear. General notation: Y = b0 + b1X1 + b2X2 + b3X3...bnXn Where: Y = Dependent variable b0 = Constant bn = Coefficient for independent variable Xi = Independent variable &EXAMPLE& Consumer demand for product Y = b0 + bprice + badvertising + bmerchandising + bdistribution + bcompetitive price

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• Key Concepts: 
  Ordinary least squares (OLS) is a statistical method used in demand planning in SAP SCM-APO-FCS. It is a linear regression technique that estimates the relationship between a dependent variable and one or more independent variables. OLS estimates the parameters of a linear regression model by minimizing the sum of the squared residuals. 
  
  How to use it: 
  In SAP SCM-APO-FCS, OLS can be used to forecast demand for products or services. The independent variables are typically historical demand data, while the dependent variable is the forecasted demand. The OLS model is used to estimate the parameters of the linear regression equation, which can then be used to predict future demand. 
  
  Tips & Tricks: 
  When using OLS in SAP SCM-APO-FCS, it is important to ensure that the data used for the independent variables is accurate and up-to-date. Additionally, it is important to consider any external factors that may affect demand when creating the OLS model. 
  
  Related Information: 
  For more information on OLS and its use in SAP SCM-APO-FCS, please refer to the SAP Help Portal or contact your local SAP representative.