Demand Forecasting and Inventory Planning in Omnichannel Retail

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  • 2016 Openbravo Inc. All Rights Reserved. 1

    Demand Forecasting and Inventory Planning in

    Omnichannel Retail: Ready for the Challenge? December 1st, 2016

  • 2016 Openbravo Inc. All Rights Reserved. 2

    Todays Presenters

    Hicham Lahlou

    Managing Partner

    FrePPLe

    Maarten Tromp

    Director of Product Development

    Openbravo

  • 2016 Openbravo Inc. All Rights Reserved. 3

    Todays presentation is available to download on

    the Attachment tab on the webinar page.

    Visit openbravo.com/retailers/resources/overview/

    Check out additional resources and dont forget to

    share them with your colleagues.

    Have a question? Click on the Question tab.

    Q&A will be at the end of todays presentation.

    Submit additional questions or comments after the webinar on Twitter.

    Hashtag: #obravowebinar

    Simple steps to increase the

    value of todays webinar experience

    http://openbravo.com/retailers/resources/overview/

  • 2016 Openbravo Inc. All Rights Reserved. 4

    Introduction

    Part 1: Importance of

    planning in retail

    Part 2: Advanced Planning

    Software

    Takeaways

    QnAs

    Agenda

  • 2016 Openbravo Inc. All Rights Reserved. 5

    Planning in retail Part 1: The Importance of Planning in Retail

  • 2016 Openbravo Inc. All Rights Reserved. 6

    SKU proliferation

    Lengthening supply chains

    Handling returns

    Inventory accuracy

    Endless aisle

    End-to-end visibility

    Multiple channels

    New fulfillment options

    Supply Chain Challenges for Omnichannel Retailers

  • 2016 Openbravo Inc. All Rights Reserved. 7

    The hig Shopper

    73%

    42%

    40%

    35%

    Consumer demand is more

    unpredictable

    Consumers want more

    localized assortments

    Trading partners lack

    supply chain flexibility

    Consumer demand has

    deteriorated significantly

    Source:RSR Research

    How to Predict the Unpredictable?

  • 2016 Openbravo Inc. All Rights Reserved. 8

    The importance of Forecasting

    .

  • 2016 Openbravo Inc. All Rights Reserved. 9

    Demand Forecasting

    Inventory Planning

    Distribution Planning

    Advanced Planning Solutions

    ADVANCED PLANNING SOFTWARE

  • 2016 Openbravo Inc. All Rights Reserved. 10

    The high cost of bad Forecasting

    634

    472

    Lost Sales ($bn)

    Out-of-stocks

    Overstocks

    Total = $1.1 trillion

    Source:IHL Group

  • 2016 Openbravo Inc. All Rights Reserved. 11

    When Planning goes Wrong

    Photo credit: Alamy.com

    BHS ordered extra stock to keep

    shoppers coming into its stores during

    its Closing Down Sale

    But the plan backfired as the stores

    were left with unsold stock

  • 2016 Openbravo Inc. All Rights Reserved. 12

    57%

    58%

    56%

    63%

    UK

    USA

    France

    Germany

    % shoppers who go elsewhere when experience stockouts in stores

    Stockouts turn into lost Sales

    Source: GT Nexus

  • 2016 Openbravo Inc. All Rights Reserved. 13

    Do NOT have formal omnichannel demand planning processes

    71% Plan to upgrade their omnichannel demand planning systems within two years

    41%

    Advanced Demand Forecasting not the norm

    Source: Boston Retail Partners

  • 2016 Openbravo Inc. All Rights Reserved. 14

    How to Predict the Future

    Source: GT Nexus

  • 2016 Openbravo Inc. All Rights Reserved. 15

    Many Factors affect Demand

    Market trends,

    product

    lifecycles,

    seasons,

    locations and

    the economy

    can all affect

    demand

    frequency and

    levels

  • 2016 Openbravo Inc. All Rights Reserved. 16

    Key Factor is the Weather!

    Seasons make a significant difference for apparel and

    home improvement retailers

    Weather sensitivity also

    typically plays a big role in

    demand planning for many

    retailers

    But who can predict the weather?!

  • 2016 Openbravo Inc. All Rights Reserved. 17

    More efficient supply chain management

    Improved inventory management

    Improved customer service and satisfaction

    Reduced out-of-stocks and overstocks

    Better cashflow management

    More accurate budgeting

    On-time shipments and payments

    Less back orders and returns

    Better Planning brings Multiple Benefits

  • 2016 Openbravo Inc. All Rights Reserved. 18

    Demand Forecasting as Competitive Weapon

    15% less inventory

    17% improvement in order fulfillment

    35% shorter cash-to-cash cycle

    90% reduction in stockouts

    Source: Gartner Group, AMR Research

  • 2016 Openbravo Inc. All Rights Reserved. 19

    Part 2: Advanced Planning Software

  • 2016 Openbravo Inc. All Rights Reserved. 20

    No formal process

    exists

    Ad hoc actions

    with short term

    and limited

    visibility

    Isolated planning

    process

    Manual planning

    Plan is not up to

    date

    Incomplete data

    (typically excel)

    Limited plan

    visibility

    Continuous

    firefighting

    Consistent and

    complete planning

    process

    Consistent data

    Plan shared within

    the organization

    Planning process

    becomes an asset

    Focus on KPI

    improvement

    Planning process

    is competitive

    advantage

    Undisciplined

    Reactive

    Proactive

    Optimized

    Planning Process Maturity Model

    Planning a path to Maturity

  • 2016 Openbravo Inc. All Rights Reserved. 21

    Day in the life of a Planner

    How do we make sure we are not exceeding

    supplier capacities?

    When can we ship this new order?

    What quantity will I sell in 6

    months from now ?

    Which supplier shall I choose for

    that purchase order?

    Some tough questions a

    planner has to answer

    What should be my safety stock for that product?

    Which orders risk to be

    shipped late?

    Which purchase

    orders should be expedited?

  • 2016 Openbravo Inc. All Rights Reserved. 22

    What is FrePPLe?

    FrePPLe IS An Advanced Planning and Scheduling Tool

    (APS) Organization of future activities

    Short term scheduling

    Mid-term planning

    Integration with other business

    applications

    FrePPLe IS NOT A Business Intelligence solution with powerful

    reporting on past performance

    An Enterprise Resource Planning system controlling all transactions

    A Manufacturing Execution System capturing ongoing activity on the shop floor

    NOW

    APS

    ERP MES

    BI

  • Know your Process

    Demand Forecasting

    Computes and manually review your forecast

    Forecast Netting

    Subtracts the actual orders from the forecast

    Inventory Planning

    Calculates your safety stock

    and reorder quantities

    Distribution Planning

    Creates supply plans that are constrained by lead time or

    material availability

    Output

    Generates purchase orders and distribution orders for ERP

    Demand Forecasting

    Forecasting Netting

    Inventory Planning

    Distribution Planning

  • 2016 Openbravo Inc. All Rights Reserved. 24

    Forecasting algorithm analyzes the demand history and generates

    a baseline forecast for the future: Implements a pick-best choice among different forecast methods

    to select the one giving the lowest forecast error

    Users adjust the forecast: Override computed forecast

    Correct outliers from the demand history

    Force the forecast method

    Demand Forecasting (1/2)

  • 2016 Openbravo Inc. All Rights Reserved. 25

    Demand Forecasting (2/2)

    The forecast can be calculated at any hierarchy level

    of products, customers and locations This allows users to detect trend and seasonality. The forecast is then disaggregated at the lowest level.

    The forecast can also be edited at any hierarchy level This allows users to apply a forecast pattern for a group of

    products, locations, and/or customers.

  • 2016 Openbravo Inc. All Rights Reserved.

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