statistical forecasting case by 4c consulting
DESCRIPTION
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.comTRANSCRIPT
Mark Maldeghem
Media Services Manager
SAS Forum BeLux 2013 : Smarter Analytics – The answer to a changing media environment
Case study Concentra NV
Simon BlanchaertConsultant
A small introduction …
Concentra in a few words :
A small introduction …
Concentra in a few words :
A small introduction …
Concentra in a few words :
NEWSPAPERS• Het Belang van Limburg
• De Gazet van Antwerpen
• Metro
A small introduction …
Concentra in a few words :
AUDIOVISUAL• National TV stations
• Radio
• Regional TV stations
A small introduction …
Concentra in a few words :
CLASSIFIEDS• Hebbes.be
• Autokanaal.be
• Vakantiekanaal.be
A small introduction …
Concentra in a few words :
And many more …
A small introduction …
4C Consulting in a few words :
A small introduction …
4C Consulting in a few words :
Trusted advisor in customer interaction
services …
A small introduction …
4C Consulting in a few words :
And a serious expertise in data
analytics !
Okay, the media industry has some good news …
Some context …
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 …
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
So let’s compare !
Some context …
FLEMISH PAID NEWSPAPER DIGITAL SALES 2010 - 2012
98%
2%
PRINTDIGITAL
So let’s compare !
Some context …
FLEMISH PAID NEWSPAPER DIGITAL SALES 2010 - 2012
98%
2%
PRINTDIGITALOkay, there still is
a long way to go !
DIGITAL SALES
Low volume, but increasing
Some context …
Allright allright, it’s clear that …
High volume, but declining
DIGITAL SALES
PAPER SALES
Low volume, but increasing
Some context …
Allright allright, it’s clear that …
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 …
Some context …
So why not bundle best of both to optimize the offer ?
Subscription sales Single – copy sales
Some context …
Sales channels
Subscription sales Single – copy sales
Some context …
Sales channels
Can we optimize this ?
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 ?
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 ?
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 …
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 …
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
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
mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij0
1020304050607080
The case …
PAST FUTURE
ARIMA forecasting method
mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij0
1020304050607080
PAST FUTURE
The case …
ARIMA forecasting method
mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij mawoe vrij ma
woe vrij0
1020304050607080
PAST FUTURE
The case …
ARIMA forecasting method
Okay, now we know how much sold newspapers we can expect on average…
The case …
Okay, now we know how much sold newspapers we can expect on average…
… taking trends and seasonal effects into account …
The case …
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 …
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
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
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
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
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
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
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 …
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 :
-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
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
Sounds great … And what did you learn ?
The key learnings …
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
The questions …
The end …
Mark Maldeghem
Media Services Manager
Simon BlanchaertConsultantThank you !