What is coefficient of variation in SAP SCM-IBP-DM - Demand?

SAP Term: coefficient of variation

• Component: SCM-IBP-DM

• Component Name: Demand

• Description: A statistical measure that describes the variability of a statistical variable compared to its mean, expressed in a percentage format. It is calculated for the difference between forecasted and actual demand and indicates how forecastable the sales is. Higher values indicate a lower level of forecastability for sales and the need for higher safety stock levels.

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• Key Concepts: 
  Coefficient of variation (CV) is a statistical measure of the dispersion of data points around the mean. It is calculated by dividing the standard deviation by the mean and multiplying by 100. In SAP SCM-IBP-DM Demand Planning, it is used to measure the variability of demand over time. 
  
  How to use it: 
  The coefficient of variation can be used to compare different demand patterns over time. It can also be used to identify trends in demand and to determine whether a particular demand pattern is stable or volatile. 
  
  Tips & Tricks: 
  When using the coefficient of variation, it is important to remember that a higher value indicates greater variability in demand. Therefore, it is important to consider other factors such as seasonality and customer behavior when interpreting the results. 
  
  Related Information: 
  The coefficient of variation can be used in conjunction with other statistical measures such as mean absolute deviation and standard deviation to gain a better understanding of demand patterns. Additionally, it can be used in conjunction with forecasting methods such as exponential smoothing and ARIMA models to improve accuracy.