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NCR-Demand Forecasting Solution overview

NCR-Demand Forecasting Solution overview. Sean Cassidy Program manager EMEA July11th 2001. Agenda. Demand Chain Management Vs Supply Chain Management NCR- Solution Overview Forecasting Solution Success Stories Business Value Wrap-up and next steps. Demand Chain Planning.

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NCR-Demand Forecasting Solution overview

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  1. NCR-Demand Forecasting Solution overview Sean Cassidy Program manager EMEA July11th 2001

  2. Agenda • Demand Chain Management Vs Supply Chain Management • NCR- Solution Overview • Forecasting Solution • Success Stories • Business Value • Wrap-up and next steps. NCR Demand Chain Management

  3. Demand Chain Planning • Prime Objective • “Reduce inventory investment while improving service levels” NCR Demand Chain Management

  4. How important is Demand Chain Management? Demand Chain Management (a comparison to supply chain) Supply sideretailers attempt to profit via procurement dealings, then push to consumers… Demand sideretailers profit through inventory efficiencies when correct assortment and inventory matches store level consumer demand NCR Demand Chain Management

  5. The obstacle to efficient Supply Chain Management is visibility of consumer demand Product Flow Distribution Center Manufacturer Plant Carrier Retail Store Consumer Information Flow NCR Demand Chain Management

  6. Demand Chain Management Suppliers Distribution Centers Stores Customers Information Flow Product Flow NCR Demand Chain Management

  7. Assortment Management 1 Assortment Management 2 Assortment Management 3 Teradata Solutions for Retail Demand Chain Management Business Intelligence Customer Relationship Management Analysis Forecasting & Planning Modeling Teradata CRM Solutions Teradata retailDecisions Assortment Analysis Family Optimization Personalization Communication Replenishment Promotion Analysis Family Promotion Management 1 Promotion Management 2 Interaction Customer Analysis Family Customer Analysis 1 Store Operations Family Store Operations 1 Collaboration Intelligent E-Commerce Family Intelligent E-Referral Intelligent Cross-Channel Intelligent E-Analysis Loyalty Marketing MicroStrategy 7.0 Loyalty Marketing (VRMS Market Expert XR) Teradata Retail Logical Data Model Teradata Data Warehouse NCR Demand Chain Management

  8. NCR- ForecastingKey Differentiators • Proven forecasting experience and Accuracy at Location/Product level • Forecast based upon store level consumer demand • System generated seasonal profiles • Multiple forecasting algorithms with “best fit” selection • User defined business rules (Policies) • Exception Reporting Integrated with MSI • Breadth of F&R Solution Capabilities • Forecasting • Promotions Management • Contribution Management (for Category Management) • Technical • Leverage Data Warehouse Investment • Unparalleled Scalability • Strong ROI NCR Demand Chain Management

  9. Forecasting and Replenishment Process Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale • Step 1: Build & Tune Seasonal Profiles • Step 2: Calculate Deseasonalized Average Rates of Sale • Step 3: Calculate the Forecast (regular and event) • Step 4: Calculate an Order Strategy NCR Demand Chain Management

  10. SKU-Location Level Forecasting Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale SKU-Location Level Forecasting provides the ability to respond to unique local customer demand. NCR Demand Chain Management

  11. ForecastingStep 1a: Build Seasonal Profiles Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale • Profile: • Provides seasonal selling patterns • Available at all levels of the location and merchandise hierarchies • Automatic generation and tuning • Up to 4 years of detailed history used • Smoothing of causal changes in demand • Auto correction for missing demand data points and out-of-stocks NCR Demand Chain Management

  12. Step 1a: Build Seasonal ProfilesSeasonal Factors NCR Demand Chain Management

  13. ForecastingStep 1b: Tuning Seasonal Profiles Automatic Profile Tuning features: • User controlled rules or criteria for automated profile regrouping and recalculation • Recommendations to regroup Items into “best fit” models • Lock specific models • Automate or recommend changes • Create and manage user defined, seasonal selling models and use them as suggested models • Select specific periods and windows for tuning • Reporting functionality, exception based NCR Demand Chain Management

  14. Step 1b: Tuning Seasonal Profiles Automatic Profile Tuning NCR Demand Chain Management

  15. May 15 Automatic Event Shift May 2000 Mother’s Day Tool that allows the forecast to reflect events which change calendar date from year to year. • Shifts demand history to reflect the events actual date in different years. • Changes seasonal factors to reflect event shifts. • Review dates of events up to four years before and four years after current date. • Set duration of events in days. • For use with Long Range Forecasting class and SKU level. May 12 May 2001 Mother’s Day NCR Demand Chain Management

  16. Utilizing Long RangeForecasting in Planning Forecast without seasonal component resorts to simple weighted moving average NCR Demand Chain Management

  17. Utilizing Long RangeForecasting in Planning • Utilize long term trending techniques to generate system generated long range forecasts for up to 2 years. • Multiple Long Range Trend Calculations. • In Addition: • Forecast New Items by employing seasonal profiles and historical Average Rates of Sale for like or similar items. • Forecast New or Remodeled Stores by employing seasonal profiles and historical Average Rates of Sale for like or similar Stores. NCR Demand Chain Management

  18. ForecastingStep 2: Calculate ARS Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale • Deseasonalized Average Rate of Sale: • Available at all levels of the location and merchandise hierarchies • Five forecasting algorithms • 52 week exponential -52 week adaptive • 12 week adaptive -6 week adaptive • 3 week adaptive • Option to add Customer designed forecasting algorithms • Automated “Best Fit” Forecast Selection NCR Demand Chain Management

  19. ForecastingStep 3a: Calculate The Regular Forecast Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale • Forecast: • Automatic forecast calculation • Regular demand and/or event forecasts • In season forecasting for ordering and exit strategies NCR Demand Chain Management

  20. ForecastingStep 3a: Calculate The Regular Forecast NCR Demand Chain Management

  21. ForecastingStep 3b: Calculate The Promo. Forecast Event Uplift X X = Seasonal Profile Forecast Avg. Weekly Rate of Sale • Analyze past events to determine uplift based upon elasticity models • Automatically forecasts Event sales at any level of the location and merchandise hierarchy NCR Demand Chain Management

  22. Key Factors DrivingPromotional Uplift Calculation Length of Event Type of Event 15% 15% A 10% B C 10% D E 50% Sales Distribution Discount Range Price Range Contribution Code NCR Demand Chain Management

  23. Price Elasticity of Demand Coefficient Table Advertising Combinations TV/RADIO Paper Flyer Radio TV 25 20 15 10 5/ $1 $2 $3 $5 $10 $15 Discount Range Price Range Note - this table is automatically generated NCR Demand Chain Management

  24. ForecastingStep 3b: Calculate The Promo. Forecast NCR Demand Chain Management

  25. Forecasting & ReplenishmentStep 4a: Calculate Order Quantities • Forecasting Drives replenishment • Policies • Service Levels • Forecast Error • Risk Stock • Review Time • Lead Times • Drives planning and budgeting activities • Initial plan • Plan comparisons to current forecasts • Plan revisions NCR Demand Chain Management

  26. Contribution Management Contribution Code % of Sales Service Level Service Level A Top 60% 98% 98% B Next 20% 95% 95% C Next 15% 92% 92% D Next 4% 85% 85% E Bottom 1% 75% E Bottom 1% 75% • Dynamic ranking of Product performance at any level of the product or location hierarchy. • Ranking according to contribution to sales units, sales dollars and margin dollars. NCR Demand Chain Management

  27. How Does it work? NCR Demand Chain Management

  28. New Thinking on Service Level Measurement Most retailers look at service levels or out of stocks by the # of items that are out of stock. SKUsSelling Rate/ Per WeekInventory Level 1 6 0 2 2 2 3 2 10 4 1 6 5 1 8 12 Six of Twelve Units of Demand Unsatisfied… Service Level equals 50% One of five SKU’s not selling… service level equals 80% NCR Demand Chain Management

  29. Contribution Management is used in Forecasting and Planning • Forecasting: • Drives service levels • Determines replenishment policies • Planning: • Assortment planning • Merchandise planning NCR Demand Chain Management

  30. Contribution Management NCR Demand Chain Management

  31. Exception Monitor allows buyers & planners to identify and act on priorities A B C D E Out of Stock  Potential Out of Stock Overstock  Forecast Error  Dying Items  Strong Selling Items  Service Level  NCR Demand Chain Management

  32. PREDICT: Proven SKU-Store Level Forecasting Solution = + X 15% 15% A 10% Average Weekly Rate of Sales + Long-Term Trend B Profile Forecast C 10% D E • Dynamic ranking at any level of the location and merchandise hierarchies • Flexible retailer service levels • Drives forecast response factors • Enables assortment planning and prioritization 50% SKU Distribution • Automatic forecast calculation • Regular and promotional demand forecast • Short-term seasonal forecasting • Long-term forecasting • Customer designed forecasting method • Feeds planning and budgeting activities • Automatic generation and tuning • At all levels of the location & merchandise hierarchies • Smoothing of causal changes in demand • Up to 4 years of detailed history, accounts for promotional demand • Auto correction for missing demand data points and out-of-stocks • Five calculation methods • 3,6,12,52 week adaptive • 52 week exp. • Two selection processes • Best of 5 • Best of 3 (12, 6 and 3 adaptive) • Short, mid and long range trending NCR Demand Chain Management

  33. PROMPT proven SKU/Store/day Forecasting & Replenishment Store 1 … Store 2 + = SKU-Store Level Forecast Business Rules Automated Suggested Order Quantities • Multiple order and replenishment strategies consider all factors automatically • Service Levels • Forecast Error • Risk Stock • Review Time • Lead Times • Automatic SKU/Store forecast calculation • Regular and Promotional demand forecast • Short-term seasonal forecasting • Long-term forecasting • Customer designed forecasting method • Automated online ordering system, including Web-Store visibility • Forecasting drives replenishment and allocation • SKU/Store level automated orders, including promotional uplift • Exception-based reporting tools NCR Demand Chain Management

  34. WEB-Store: visibility at store level • Share forecasts and Suggested Order Quantities at the store level • Merchandise performance analysis and category management • Provides visibility into store level on-hand, in-transit, and on-order inventory NCR Demand Chain Management

  35. Web Store: Review Inventory and Approve/Adjust Recommended Order Web Store: Review Inventory and Approve/Adjust Recommended Order NCR Demand Chain Management

  36. Business Value of NCR’s Forecasting Solution • Sales Increase (Average 8%) • Gross Margin Increase • Inventory Productivity Increase (Average 40%) • Associate Productivity Increase NCR Demand Chain Management

  37. Users of our forecasting solution NCR Demand Chain Management

  38. Office DepotSuccess Story • “NCR has been a strategic partner in a range of areas that have helped us analyze data and add value to our bottom line.” • “Over the past 18 months, we’ve built supply chain information systems that give us what we believe to be strategic competitive advantage.” • “We’ll be up to six inventory turns by the end of this year and eight by the end of 2002.” Tom Shortt, Executive Vice President, Supply Chain Management Office Depot Forbes, September 11, 2000 NCR Demand Chain Management

  39. Office DepotDemand Planning Results • “Dramatically improved forecast accuracy.” • “Maintained current service levels.” • “Program paid for itself through the (13 Week) pilot prior to completion of full implementation.” • “Significantly reduced safety stock requirements in stores and distribution centers.” John Deaton, Vice President, Planning Office Depot NCR Partners Conference, September 25, 2000 NCR Demand Chain Management

  40. Office Depot’s ROI $24M Annual Profit Increase! NCR Demand Chain Management

  41. Top Retail IT Company Enterprise Value Award Office DepotIndustry Awards NCR Demand Chain Management

  42. Forecasting Success StoryLiverpool • Liverpool Background: • High end department store located in Mexico City with 41 Stores and approximately US$1.3B in annual sales. • 13 cosmetics vendors and 10,000 cosmetics sku’s per store. • Forecasting Applications: • PROMPT Suite (Contribution, Seasonal Profiles, Forecasting, Replenishment, Exception Management) for store forecasting/replenishment. • The Results: • 97% customer service level vs. 91% for cosmetics not forecasted with SDG. • 4.5 turns vs. 3.5 turns for cosmetics not forecasted with SDG. • Improved Estee Lauder service level to Liverpool from 60% to 90%. NCR Demand Chain Management

  43. Forecasting Success StoryHome Place of America • Home Place Background: • HomePlace is a $600M, 120 location bed and batch chain with 21,500 items per location. • Forecasting Applications: • PROMPT Suite (Contribution, Seasonal Profiles, Forecasting, Replenishment, Exception Management) for store forecasting/replenishment. • The Results: • Improved Turns by 20%. • Improved Customer Service Levels and Sales by 7%, from 88% to 95%. • Reduced Markdowns. • Improved buyer productivity. NCR Demand Chain Management

  44. Forecasting Success StoryLiquor Control Board of Ontario • LCBO Background: • The Liquor Control Board of Ontario (LCBO) is a $2.3B, 600 location spirits chain with 6,000 items per location and 5 distribution centers. • Forecasting Applications: • PROMPT Suite (Contribution, Seasonal Profiles, Forecasting, Replenishment, Exception Management) for DC Replenishment. • The Results: • Reduced Distribution Center inventory by $18M or 15%. • Improved Distribution Center Turns by 73%, from 6.5 to 11.0. • Improved Customer Service Levels and Sales by 4%. • Improved buyer productivity and inventory management practices. NCR Demand Chain Management

  45. Business Impact Model (US$000) NCR Demand Chain Management

  46. SDG Success StoriesWrap Up • Question: The Key Factor Driving ROI? • Answer: Forecast Accuracy! • SDG Customers Have Averaged … • An 8% increase in sales • A 40% improvement in inventory productivity. = NCR Demand Chain Management

  47. NCR- ForecastingKey Differentiators • Proven forecasting experience and Accuracy at Location/Product level • Forecast based upon store level consumer demand • System generated seasonal profiles • Multiple forecasting algorithms with “best fit” selection • User defined business rules (Policies) • Exception Reporting Integrated with MSI • Breadth of F&R Solution Capabilities • Forecasting • Promotions Management • Contribution Management (for Category Management) • Technical • Leverage Data Warehouse Investment • Unparalleled Scalability • Strong ROI NCR Demand Chain Management

  48. Supply Chain Management Functions Client Solution Needs and Functions Human Resources Finance and Administration Revenue Management Merchandise Management Warehouse Management Collaboration (CPFR) Business Intelligence Store Solutions Payroll Sales Audit Coop Tracking Purchase Order Management Logistics Exchanges Perpetual Inventory Merchandise Planning Forecasting POS Deductions Management Space Management Category Management Replenishment In-Store Back Office Point Of Sale Marketing Product Life Cycle Management Investment Buy Space Management Perpetual Inventory Demand Chain Vertical NCR Demand Chain Management

  49. Demand Chain Management... uses the efficiency of your Supply Chain to satisfy your customers • Combines decision support analysis and operational functionality's • Store/Sku level planning & replenishment • Reduced costs & increased sales • Allows for making & buying what actually sells • Improved pipeline visibility & forecasting • Reductions of over/under stocks • Enhanced merchandise planning/category management • Improved trading partner relationships NCR Demand Chain Management… The Road Map for reducing costs & increasing sales! NCR Demand Chain Management

  50. Next Steps NCR Demand Chain Management

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