Coefficient of Variation

A measure of the volatility of customer orders (or any time series), aka Demand Linearity

  1. Calculate the standard deviation (s) of the historical demand, use appropriate time buckets (daily, weekly, monthly)
  2. You might need to discard abnormal demand
  3. Calculate the historical mean (x) (or average) or use the forecast mean
  4. Then calculate the coefficient of variation (Cv)  Cv = s/x
  5. Low variability is a Cv less then 1.0, very stable demand is a Cv less than 0.5