What is Akaike information criterion in SAP SCM-IBP-DM - Demand?

SAP Term: Akaike information criterion

• Component: SCM-IBP-DM

• Component Name: Demand

• Description: A calculation method used by the auto-ARIMA algorithm to optimize automatic forecasting.

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• Key Concepts: 
  The Akaike information criterion (AIC) is a measure of the relative quality of a statistical model for a given set of data. It is based on the likelihood function and it provides a means for model selection. AIC is used in SAP's Demand Management component of the Supply Chain Management-Integrated Business Planning (SCM-IBP-DM) module to compare different models and select the best one for forecasting demand. 
  
  How to use it: 
  AIC is used to compare different models and select the best one for forecasting demand. It takes into account both the goodness of fit of the model and its complexity. The model with the lowest AIC value is considered to be the best model for forecasting demand. 
  
  Tips & Tricks: 
  When using AIC, it is important to remember that it only provides an indication of which model is best for forecasting demand. It does not guarantee that the selected model will be accurate or reliable. Therefore, it is important to evaluate the selected model using other methods such as cross-validation or bootstrapping before making any decisions. 
  
  Related Information: 
  AIC is closely related to other measures such as Bayesian information criterion (BIC) and minimum description length (MDL). These measures are also used in SAP's Demand Management component of SCM-IBP-DM to compare different models and select the best one for forecasting demand.