It measures the percentage of variation around the arithmetic mean of a series, and is calculated as follows:

Coefficient of Variation = Standard Deviation / Mean

It is commonly used as a measure of volatility in demand to assess the predictability of a demand pattern, that is, how well it can be forecasted. If COV >1.0, it can be said that variations in demand are high, and thus, statistical techniques should not be applied without further review.

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Collaborative Planning, Forecasting and Replenishment (CPFR®)