Standard deviation and

Aggregation
Hints for the Postponement Case
Combining Data
Assume we know the following about the demand of a product in three
different regions:
Region Mean Standard Deviation
1 50 10
2 75 15
3 60 14

And we want to know the mean and standard deviation of the demand
for the product combined across the three regions.
The combined mean
To calculate the combined mean all we need to do is add the means
together.
In our case that would be:
Combined mean = mean(Region 1) + mean(Region 2) + mean(Region 3)
= 50 + 75 + 60
= 185
The Combined Standard Deviation
Calculating the combined standard deviation is a bit more complicated.
(Firstly we’ll assume the there is no correlation between the demand in
one region versus the demand in any other region. If there is a
correlation then the formula we need to use is more complex.)
From your statistics course you may remember that:
Combined Variance = sum of the variances of each region
and also that
Variance = (Standard Deviation)2
The calculation …
…. so we’ll first calculated the combined variance. Then we’ll take the
square root of that to find the combined standard deviation.
Region Standard Deviation Variance
1 10 100 (=10*10)
2 15 225 (=15*15)
3 14 196 (=14*14)

The combined variance is: 521 (=100 + 225 + 196)

So the combined standard deviation is: 22.825 (= )
In conclusion
(As long as the data is not correlated):
Combined mean = sum of the means
Combined standard deviation = square root (sum of the variances)

Region Mean Standard Deviation

1 50 10
2 75 15
3 60 14
Combined 185 22.825
(=50+75+60) )