Mean Absolute Deviation (MAD):

This is the mean of the absolute deviations of forecast demands from actual demand values. It is also known as the mean absolute error.

It may be seen that MAD is simply a measure of the average deviation of actual demand from the forecast one. Therefore, it is useful particularly for systems

where the costs of forecast deviations depend on their cumulative effect regardless of whether the MAD is attributed to a large number of small errors or a small number of large errors.

MAD is related to the standard deviation by the approximation

≈ 1.25 MAD