statistical forecasting case by 4c consulting

47
Mark Maldeghem Media Services Manager SAS Forum BeLux 2013 : Smarter Analytics – The answer to a changing media environment Case study Concentra NV Simon Blanchaert Consultant

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Statistical forecasting can be very useful whenever your business contains: 1) fastmoving products: more accurate predictions (= the volume) are beneficial for your service level. You are able to reduce out of stock and overstock. 2) slowmoving products: being able to predict when (= the moment) a product will be sold can positively impact your stock & inventory KPI's. Whenever having questions or just want to elaborate upon this topic, feel free to contact me at [email protected] or visit our blog for more information: blog.4cconsulting.com

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Page 1: Statistical Forecasting case by 4C Consulting

Mark Maldeghem

Media Services Manager

SAS Forum BeLux 2013 : Smarter Analytics – The answer to a changing media environment

Case study Concentra NV

Simon BlanchaertConsultant

Page 2: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

Page 3: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

Page 4: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

NEWSPAPERS• Het Belang van Limburg

• De Gazet van Antwerpen

• Metro

Page 5: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

AUDIOVISUAL• National TV stations

• Radio

• Regional TV stations

Page 6: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

CLASSIFIEDS• Hebbes.be

• Autokanaal.be

• Vakantiekanaal.be

Page 7: Statistical Forecasting case by 4C Consulting

A small introduction …

Concentra in a few words :

And many more …

Page 8: Statistical Forecasting case by 4C Consulting

A small introduction …

4C Consulting in a few words :

Page 9: Statistical Forecasting case by 4C Consulting

A small introduction …

4C Consulting in a few words :

Trusted advisor in customer interaction

services …

Page 10: Statistical Forecasting case by 4C Consulting

A small introduction …

4C Consulting in a few words :

And a serious expertise in data

analytics !

Page 11: Statistical Forecasting case by 4C Consulting

Okay, the media industry has some good news …

Some context …

Page 12: Statistical Forecasting case by 4C Consulting

2004 2005 2006 2007 2008 2009 2010 2011 915,000

925,000

935,000

945,000

955,000

965,000

975,000 970,309

958,180

944,846

933,030

922,987

919,371

921,043 918,964

STEEP DECLINE UNTIL 2008, GENTLE DECLINE FROM 2009.

# of

pai

d co

pies

FLEMISH PAID NEWSPAPER PRINT SALES 2004 - 2011

But unfortunately, focus is needed to stabilize the print circulation …

Some context …

Page 13: Statistical Forecasting case by 4C Consulting

FLEMISH PAID NEWSPAPER DIGITAL SALES 2010 - 2012

Nevertheless …

Some context …

2010 2011 20120

5000

10000

15000

20000

25000

4900

12300

21650

# of

pai

d co

pies

Page 14: Statistical Forecasting case by 4C Consulting

So let’s compare !

Some context …

FLEMISH PAID NEWSPAPER DIGITAL SALES 2010 - 2012

98%

2%

PRINTDIGITAL

Page 15: Statistical Forecasting case by 4C Consulting

So let’s compare !

Some context …

FLEMISH PAID NEWSPAPER DIGITAL SALES 2010 - 2012

98%

2%

PRINTDIGITALOkay, there still is

a long way to go !

Page 16: Statistical Forecasting case by 4C Consulting

DIGITAL SALES

Low volume, but increasing

Some context …

Allright allright, it’s clear that …

Page 17: Statistical Forecasting case by 4C Consulting

High volume, but declining

DIGITAL SALES

PAPER SALES

Low volume, but increasing

Some context …

Allright allright, it’s clear that …

Page 18: Statistical Forecasting case by 4C Consulting

What’s the strategy for the future ?

High volume, but declining

DIGITAL SALES

PAPER SALES

Low volume, but increasing

Some context …

Allright allright, it’s clear that …

Page 19: Statistical Forecasting case by 4C Consulting

Some context …

So why not bundle best of both to optimize the offer ?

Page 20: Statistical Forecasting case by 4C Consulting

Subscription sales Single – copy sales

Some context …

Sales channels

Page 21: Statistical Forecasting case by 4C Consulting

Subscription sales Single – copy sales

Some context …

Sales channels

Can we optimize this ?

Page 22: Statistical Forecasting case by 4C Consulting

TOO MANY NEWSPAPERS

Overstock

Unsold newspapers are useless

2 situations

The case …

TOO FEWNEWSPAPERS

Out of Stock

Missed sales

‘ The Newsboy problem’ :How many newspapers should I deliver to each POS ?

Page 23: Statistical Forecasting case by 4C Consulting

TOO MANY NEWSPAPERS

Overstock

Unsold newspapers are useless

2 situations

The case …

TOO FEWNEWSPAPERS

Out of Stock

Missed salesOptimal number of newspapers ?

‘ The Newsboy problem’ :How many newspapers should I deliver to each POS ?

Page 24: Statistical Forecasting case by 4C Consulting

Traditional forecasting method:The weighted moving average

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080

PAST FUTURE

X-4 X-3 X-2 X-1X

Forecast for next Saturday : X = (X-4 * 10%) + (X-3 * 20%) + (X-2 * 30%) + (X-1 * 40%) / 4 X = (60 * 10%) + (63 * 20%) + (66 * 30%) + (68 * 40%) / 4

= 66 newspapers

The case …

Page 25: Statistical Forecasting case by 4C Consulting

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080 1

1 Ignoring the upward trend

X-4 X-3 X-2 X-1X

PAST FUTURE

Traditional forecasting method:The weighted moving average

The case …

Page 26: Statistical Forecasting case by 4C Consulting

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080 1

2

1 Ignoring the upward trendOnly taking 4 weeks of history into account2

X-4 X-3 X-2 X-1X

Traditional forecasting method:The weighted moving average

The case …

PAST FUTURE

Page 27: Statistical Forecasting case by 4C Consulting

20102010

20102010

20102010

20112011

20112011

20112011

20122012

20122012

20122012

0

100000

200000

300000

400000

500000

600000

700000

Coast POSStable POS

The case …

Seasonally influenced POS versus stable POS

Page 28: Statistical Forecasting case by 4C Consulting

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080

The case …

PAST FUTURE

ARIMA forecasting method

Page 29: Statistical Forecasting case by 4C Consulting

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080

PAST FUTURE

The case …

ARIMA forecasting method

Page 30: Statistical Forecasting case by 4C Consulting

mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij mawoe vrij ma

woe vrij0

1020304050607080

PAST FUTURE

The case …

ARIMA forecasting method

Page 31: Statistical Forecasting case by 4C Consulting

Okay, now we know how much sold newspapers we can expect on average…

The case …

Page 32: Statistical Forecasting case by 4C Consulting

Okay, now we know how much sold newspapers we can expect on average…

… taking trends and seasonal effects into account …

The case …

Page 33: Statistical Forecasting case by 4C Consulting

Okay, now we know how much sold newspapers we can expect on average…

… taking trends and seasonal effects into account …

But is this is the optimal number of newspapers to deliver ?

The case …

Page 34: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

= A smart newsboy !

He expects to sell 70 newspapers

But he realizes that the average expected

demand comes with a standard error

0

0.05

0.1

0.15

0.2

0.25

64 66 68 70 72 74 76

ARIMA model output:Forecast : 70 Standard error : 2

Distribution of demand

3 2 1 0 1 2 3

Page 35: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

0

0.05

0.1

0.15

0.2

0.25

64 66 68 70 72 74 76

ARIMA model output:Forecast : 70 Standard error : 2

Distribution of demand

3 2 1 0 1 2 3

Page 36: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

0

0.05

0.1

0.15

0.2

0.25

64 66 68 70 72 74 76

ARIMA model output:Forecast : 70 Standard error : 2

Distribution of demand

3 2 1 0 1 2 3

Out of Stock

Page 37: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

0

0.05

0.1

0.15

0.2

0.25

64 66 68 70 72 74 76

ARIMA model output:Forecast : 70 Standard error : 2

Distribution of demand

3 2 1 0 1 2 3

Out of Stock Overstock

Page 38: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

“ Actually, I don’t bother with statistics,

I just want to maximize my profit “

Integration of Marginal Profit (MP) & Marginal Cost (MC)

Probability of selling an extra newspaper

* MP

Probability of NOT selling an extra newspaper

* MC

Page 39: Statistical Forecasting case by 4C Consulting

Going a step further …

The case …

Optimal number of newspapers to maximize profit ?

Formula for finding balance point

between profit & cost:

MC----------------- MP + MC

62

62.5

63

63.5

64

64.5

65

65.5

66

66.5

67

67.5

68

68.5

69

69.5

70

70.5

71

71.5

72

72.5

73

73.5

74

74.5

75

75.5

76

76.5

77

77.5

78

0

0.05

0.1

0.15

0.2

0.25

Taking into account the MP & MC, we are able to deliver in 67 % of the cases

Page 40: Statistical Forecasting case by 4C Consulting

ConclusionOur new way of forecasting …

… is completely automated …

… takes into account trends and seasonal effects …

… is optimized by balancing potential profit & costsin the forecasting process …

So how about some results ?

The case …

Page 41: Statistical Forecasting case by 4C Consulting

The planning …

September

August

July

June

May

April

March

2013

Automated steering Go live Parallel evaluation period between manual and automated steering

Incorporation of additional business rulesManual steering

After Proof of Concept in 2012 :

Page 42: Statistical Forecasting case by 4C Consulting

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-0.5% -0.5%

1.5%

-0.4%

0.1%

-0.3%

2.1%

0.1%

-0.4%

-0.8%

1.6%

0.0%

% Out Of Stock

mrt/13jul/13sep/13

The results …

GVA Kerngebied

Keten

GVA KerngebiedNiet - Keten

HBVLKerngebied

Keten

HBVL KerngebiedNiet - Keten

Conclusion:

A positive effect on Out of Stock copies

that are under target

Positive financial contribution

Page 43: Statistical Forecasting case by 4C Consulting

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1.6%

5.2%

3.9%

2.6%

3.9%4.2%

3.1%

1.9%

2.9%

3.5%

1.4% 1.4%

% Unsold

mrt/13jul/13sep/13

The results …

GVA Buiten Kern

Brabantse Rand

HBVL Buiten Kern

Kempense Rand

Conclusion:

The automated steering also results in

less unsold copies

Positive financial contribution

Page 44: Statistical Forecasting case by 4C Consulting

Sounds great … And what did you learn ?

The key learnings …

Page 45: Statistical Forecasting case by 4C Consulting

Sounds great … And what did you learn ?

The key learnings …

The choice of a capable partner

Specific knowledge in advanced analytics

Project management (budget & time)

Guidance in software solutions

After sales support

The choice of a reliable software platform

Scalable solution in line with the needs of Concentra

High computational power

Low maintenance cost

Page 46: Statistical Forecasting case by 4C Consulting

The questions …

Page 47: Statistical Forecasting case by 4C Consulting

The end …

Mark Maldeghem

Media Services Manager

Simon BlanchaertConsultantThank you !