Inventory Management
Example of Demand Variation Measurement
Example of how MAD and SD are used to measure demand variation.
What it does
Example of how MAD and SD are used to measure demand variation.
See it in action
A worked example
Demand for one product over four equal weeks. The mean is 50. MAD (mean absolute deviation) is the average distance from the mean. The sample standard deviation (SD) weights big misses more heavily.
| Week | Demand | Distance from mean |
|---|---|---|
| 1 | 48 | 2 |
| 2 | 52 | 2 |
| 3 | 45 | 5 |
| 4 | 55 | 5 |
MAD is 3.5 units and the sample SD is 4.40 units. Variation describes the past; it is not a forecast.
What data it needs
We will list the data this Tool-module needs when it is ready to launch.