In a previous blog post, we discussed how a high or low value of Coefficient of Variation (CV) impacts the first or second term of safety stock. Today we decided to put this to the test using real customer data - here we will discuss our findings.
In one of my previous posts, I wrote about using coefficient of variation (CV) as a predictor of forecastability. In this post, I will talk about how it can be used to indicate a sensitivity of lead time towards the safety stock calculations. To quickly remind the reader first: The formula for CV = StdDev
Key Point: Coefficient of Variation is not a perfect measure of forecastability. However, if used properly, it can add value to a business’s forecasting process. In the world of forecasting, one of the key questions to consider is the forecastability of a particular set of data. For example, a salesman might consistently be better at