This webinar examines why retailers need to improve their current Demand Forecasting and Inventory Planning capabilities. Leading experts from Openbravo and FrePPLe explain the importance of Advanced Planning Software in producing more reliable sales forecasts and optimizing the allocation of inventory to significantly reduce costs associated with forecast errors.

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Demand Forecasting and Inventory Planning in
Omnichannel Retail: Ready for the Challenge?
December 1st, 2016

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Today’s Presenters
Hicham Lahlou
Managing Partner
FrePPLe
Maarten Tromp
Director of Product Development
Openbravo

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 Introduction
 Part 1: Importance of
planning in retail
 Part 2: Advanced Planning
Software
 Takeaways
 QnAs
Agenda

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 Planning in retailPart 1: The Importance of Planning in Retail

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 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

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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?

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The importance of Forecasting
.

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Demand
Forecasting
Inventory
Planning
Distribution
Planning
Advanced Planning Solutions
ADVANCED PLANNING SOFTWARE

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The high cost of bad Forecasting
634
472
Lost Sales ($bn)
Out-of-stocks
Overstocks
Total = $1.1 trillion
Source:IHL Group

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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

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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

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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

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How to Predict the Future
Source: GT Nexus

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Many Factors affect Demand
Market trends,
product
lifecycles,
seasons,
locations and
the economy
can all affect
demand
frequency and
levels

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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?!

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• 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

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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

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Part 2: Advanced Planning Software

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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

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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?

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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

23. 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

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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)

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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.

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Net Open Sales Orders from Forecast
 Short term demand consists primarily of customer sales orders
 Longer term demand consists primarily of sales forecast
The forecast consumption logic reconciles both into a total demand
signal that is consistent and complete across the entire horizon
Gross Forecast: 100
 Orders Already Received: 20
 > Net Forecast: 80
Forecast Netting

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Compute safety stock and reorder
quantity, using of the following
methods:
 Automatic:
• Economic order quantity
(Wilson formula)
• Safety stock calculated
for desired service level
 Quantity:
• Fixed quantity
 Period of cover:
Expressed as periods
of forecasted demand
Users can override the values
per period
Inventory Planning

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Computes purchase orders and distribution orders to fulfill
the demand (Forecast + Customer orders + Safety stock)
APS takes supplier constraints into consideration, such as:
• Lead times
• Priority among suppliers if multiple sourcing
• Item cost
• Minimum/multiple order quantity
• Supplier capacity
• Vacations
Balances stock among warehouses automatically
Distribution Planning

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How APS Integrates with your ERP
APS
Distribution
Planning (DRP)
Demand management/Forecast
Material requirement
planning (MRP)
Simulation - Optimisation
ERP
Sell
Replenish
Finance
Control
• Products
• Warehouses
• Suppliers
• Unit cost
• Distribution lanes
• Logistic costs
• Customer orders
• On hand
• On order
Budget
Budget
Financial KPIs
BI / Reporting
Static data
Dynamic data
• Plans
• Purchase orders
• Distribution orders

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 An APS brings your planning process
to a new level of maturity
 Direct impact on business and faster
ROI
• Improved planner productivity
• Reduced inventory
• Increased cash flow
• Improved delivery date accuracy
• Agile response to market demand
 An APS helps you taking long-term
strategic decisions
• Simulation capabilities (supplier
management, facilities management…)
FrePPLe Value Proposition

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Key Takeaways
 Customer demand is much less predictable in the
omnichannel era
 Cross-channel fulfillment complicates demand
forecasting further
 Bad planning causes out-of-stocks, overstocks,
customer dissatisfaction and poor financial
performance
 Advanced planning software improves demand
forecasting, inventory planning and distribution
planning
 The benefits include reduced inventory, improved
fullfillment and shorter cash cycles
 .

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Any Questions?
You can submit additional questions or
comments after the webinar on Twitter.
Hashtag: #webinar_OB
#webinar_OB

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Web: www.openbravo.com/contact
Email: info@openbravo.com
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