| ordinary least squares (SCM-APO-FCS) |
Ordinary least squares regression is a linear approach to multiple regression that eliminates the error term (ei) by squaring the error terms to create a Best Linear Unbiased Estimate (BLUE). This method has some very attractive statistical properties that have made it one of the most popular methods of regression analysis.
Demand Planning uses the ordinary least squares method to do multiple linear regression.
Ordinary least squares regression may be a linear modeling approach, but many times it works in situations where the data is non-linear.
General notation:
Y = b0 + b1X1 + b2X2 + b3X3...bnXn
Where:
Y = Dependent variable
b0 = Constant
bn = Coefficient for independent variable
Xi = Independent variable
Consumer demand for product Y = b0 + bprice + badvertising + bmerchandising + bdistribution + bcompetitive price