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I was trying to understand how to use XYZ analysis when I came upon this article. The author says that using coefficient of variation of an item (which is a ratio of standard deviation and average demand of the item) is flawed as it is a scaled version of standard deviation.

Textbooks have supported the use of coefficient of variation. This is so flawed that every time I read it… well, let me explain the issues. The coefficient of variation is a scaled version of the standard deviation of the historical sales. This tells us nothing about the easiness to forecast sales or not.

^ extract from the article

I wanted to know -

  1. What is meant by the statement in bold from the passage?
  2. And, if you would entertain it, under what conditions scaled measures are flawed?
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They refer to coefficient of variation

$$ c_v = \frac{\sigma}{\mu} $$

so it calculates the variability $\sigma$ relatively to the mean $\mu$. But beware that there are problems with this statistic, as described in both links.

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