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Supply Chain and Operations Management Glossary (M)

MAD (Minimum Absolute Deviation): A measure of statistical error defined as the average absolute deviation between the forecast and the actual, or perhaps alternatively between the mean and the actual. Contrast this with standard deviation, which measures the average squared difference. If our costs (e.g., shortage or inventory) are simply proportional to our overage or underage, then MAD may be a more useful measure of error. One of the early motivations for using the MAD in forecasting systems was that the MAD takes about half as much work to compute as the standard deviations. For random variables with a Normal distribution,…

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