Analytics in Action

Improve Demand Forecasts. Sales up by $ 3MM, stock-outs down

Client : A US-based Manufacturer of Customized Gifting Products

Business Situation :
US-based manufacturer of personalized gift items; with presence across North America, Australia, Europe and Middle East. They have over
3,000 sku’s on offer; across 8 product platforms and 13 countries. SKU’s are supplied from Far East suppliers, with a 3-month lead time. And
almost 60% of Customers purchase gift items for immediate consumption; with the remaining having a deferred shipment date through out
the year. In addition, the manufacturer runs SKU-level promotions through-out the year, which result in SKU-specific demand. Critical to have
accurate sku-level demand forecast so that all orders are met; while maintaining optimal inventories.

The Task :
- Develop a framework and relevant forecasting models for improving the forecast process and accuracy.
- Obtain a robust and accurate SKU-level forecasting for each week over a year.
- Implement the predictive models so that forecasting is improved, inventory levels are optimal and customer satisfaction is improved.

Analytical Framework :
The solution was aimed at simplifying the process and improving the timeliness and accuracy of demand forecast:
1. Simplify and automate some of the current processes that were cumbersome and susceptible to human error.
2. Use statistical analysis to learn from historical trends, project future demand, and create an Early Warning System to predict weekly excess
and stock-outs at SKU level.
3. Improved the existing process of predicting repeat business using cannibalization models and also provided shipment profiles with insights
on patterns of how products shipped out to customers. This helped in placing timely and appropriate Purchase Orders with suppliers.
4. Provided dashboards for measuring forecast accuracy and also performance of shipments.
5. Adhoc analytics to support current forecasting, customer care and marketing decisions e.g. quantifying financial impact of late shipments

Under-forecasted
Growing
Over- forecasted
Growing
forecast
WC89803A, +, +

WC74903A, +, +
WA38001A, -, -
WC74903B, +, +

WC83945B, -, - WC62545A, -, -
WC57001A, +, + WC74846B, +, +
WC69501A, +, +
WC83945A, +, +

WC57001B, -, -
WC58802A, +, + WC80446A, -, -

WC83504A, +, +
WC28301A, -, - WC62545B, -, -

WC58802B, +, +
WD25646A, +, + WC93001A, +, + WC74846A, +, +
WC88102A, -, -
WC30146B, -, -
WA85401A, -, - WC30146A, -, -
WC28801A, +, + WC59004B, -, -
WD18006A, +, +
TD72601B, -, - WC59004A, -, -
Sales growth (PY)

WC87901B, +, + WC87901A, -, - WC59401A, +, +

WD11202A, -, -
WD01993A, +, +
WD31503B, -, - WC59401B, -, -
WC81001A, -, -

WD06001A, -, -

Under-forecasted Over-forecasted
Declining Declining
Forecast Variance

MAPE - 23.47% 400000

Plan C
FY_2009
40000 30000 350000 YTD_2010
359051

Regression 1
30000 25000 Regression 2
300000

20000 2UCL
20000 250000
235386
10000 3UCL
15000 211658.2184
200000 198157 196496.3737
0 2LCL

-10000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 10000 3LCL 150000

5000 Variance 100000

-20000

-30000 0 50000

-40000 -5000 0
1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152

The Result :
• Better sku-level forecasts and ability to react faster to products becoming hits.
• Less obsolete inventory at the end of the year meant freeing up working capital and reducing waste. Lower stock-out rates also meant
better customer satisfaction in addition to revenue. Since repeat customers are their main focus, this factor is critical in preventing
unnecessary attrition.
• More scientific approach to forecasting, thereby eliminating any bias in subjective forecasting logic.
About Marketelligent
Marketelligent provides data analytics-based consulting
and outsourcing services that help you make smarter
business decisions. The firm is backed by senior
professionals with experience across Consumer focused
industries - Retail Banking, Consumer Packaged Goods,
Consumer Retail, Telecom and Media. We offer an
affordable global delivery model leveraging the best of
domain expertise and analytic capabilities.

Management Team -
Roy Cherian - CEO MBA – IIM Ahmedabad

• Over 18 years experience in Marketing, Advertising and Media Industry, a significant part in the Food and Consumer
Packaged Goods industry
• Headed Marketing Services, Marketing Operations and the Chocolate and Confectionary business of Nestle India
• Pioneering work in Media and Marketing Mix Optimization

Anunay Gupta, PhD - COO & Head of Analytics MBA – NYU Stern School of Business

• Over 11 years of international experience in Consumer Finance and Retail Banking

• Set up offshore Analytics capability for Citigroup. Managed $145B portfolio for Citigroup US Cards. Leadership role
in American Express Risk management
• Extensive experience in analytics, advanced modeling and predictive techniques

Issac Mathew - Head of Client Services MBA – IIM Calcutta

• Over 11 years of experience in Information Technology Consulting in Retail, CPG, Supply Chain and ERP
• Part of the Cognizant US team which managed clients like Walmart, 7-Eleven, Ace Hardware, AC Nielsen and HE
Butt
• Head of the Business Intelligence practice at PricewaterhouseCoopers, Southern India

Our Clients -

CONTACT www.marketelligent.com

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