New product configurations and long-tail demand continue to drive forecast error. Influences such as demand shaping (media, promotions, NPI) and internet buying further complicate the picture. Supply chain planning has become fractured across multiple channels and competing objectives. In some companies, forecast accuracy has declined.Many companies are searching for answers to questions such as: How to forecast online sales demand? How to inventory for it? How much forward DC inventory to hold? Should we share inventory between channels?
And many companies are starting to address the need to automate the decision process, shifting the role of planner to become more productive. Some are asking why they need armies of planners. And whether non-value added effort is preventing them from reaching higher levels of planning maturity?
CUSTOMER CASE STUDY
Dairy leader Granarolo was challenged by short shelf life products and strong promotional pressures. They ran thousands of promotions annually, producing 34,000 item–promotion forecasting combinations and causing demand peaks up to 30 times baseline sales. Their complex distribution network (six logistic platforms, 35 transit depots and a large fleet of hundreds of refrigerated vehicles) required optimized inventory management and the ability to provide respond immediately to maximize customer service levels while complying with all logistical constraints.
With ToolsGroup, Granarolo created a highly reliable demand and supply plan for their perishable products. Core to their solution was the ability to forecast promotions and correctly estimate peak demand. ToolsGroup’s trade promotion forecasting used machine learning to automatically predict promotional peaks and propose dynamic safety stock levels to maintain high service levels in the face of changing demand.
Granarolo brought its average forecast reliability from 80 to 85 percent, increasing sales. Inventory levels were reduced by more than 50 percent, cutting capital and lead time in half. By reducing delivery time, Granarolo also significantly increased product freshness (point-of-sale residual shelf life) and minimized obsolescence.
Granarolo reduced transportation costs incurred from having to make urgent deliveries.
With the benefit of reliable, up-to-date data, we treat inventory in a totally different and structured way. Planners find it much more satisfying and even fun to work with this data because they know it’s going to be used somewhere, and they get immediate feedback. Also, because they don’t have to spend all their time manually crunching numbers, they’re freed up to engage in more valuable work.
Erik Börtemark, Supply Chain Director at Findus Sweden AB