This was my first lesson in forecasting and replenishment. “When you re-order toothpaste, in particular,” the drug store owner explained to me, his new hire, “you eyeball how many pieces we have on the shelf and make sure you order just enough so that we never run out, but not so much that my money is tied up in the stock room.”
Back in those days, eyeballing inventory for a three-aisle drug store was a low-risk practice that didn’t take long to master. But even in that small store, I’m guessing a little technology would have gone a long way toward improving forecasting and replenishment to reduce costs and boost profitability.
Today, retailers who are thinking about investing in forecasting and replenishment solutions don’t have to guess about ROI. Instead, analytic services are available to help retailers quantify the benefits of deploying forecasting and replenishment software before actually making a purchase.
Answering “What if?”
Here’s how SAP does it. During a one or two-day workshop, experts from the Center of Excellence at SAP meet the customer to determine which historical sales and stock data will best support the analysis of the software implementation.
The data is then collected and analyzed for overall quality. The customer receives a comprehensive report that summarizes data quality and consistency. When discrepancies are identified, the experts evaluate data cleansing options and propose solutions to optimize the analysis.
External influencing factors – such as calendar events and promotions – are calculated to produce a more realistic forecast. Scenarios related to the retailer’s business objective are then selected, and then proof-of-value simulations are conducted.
The analytics service uses the simulated order and stock figures to calculate several important key performance indicators, such as:
- Average stock
- Average stock value
- Average out-of-stock rate
- Lost profit
At a follow-up workshop, the results of the proof-of-value simulations are compared with the retailer’s historical data. The experts then help the retailer calculate the economic potential of deploying the forecasting and replenishment software.
According to the old saying, nothing is certain but death and taxes. But with services like these, retailers can have more confidence in the benefits of deploying forecasting and replenishment software.
Learn more about forecasting and replenishment software solutions and services from SAP.