An ongoing challenge for modern-day demand planners and inventory managers is improving the accuracy of demand forecasts. Besides the algorithmic challenge of minimising the forecast error, there is also the challenge of understanding and optimising the trade-off between working capital costs and service levels to customers. In complex operating environments where many variables impact on the actual demand realised for specific products in specific geographies, demand forecast accuracy can quickly degrade, resulting in:

  • Expedited shipping costs due to the wrong inventory being at the wrong place at the wrong time
  • Stock-outs and compromised services levels to customers, especially on measures such as DIFOT and fill rates
  • Low inventory stock turns
  • Stock obsolescence
  • High forecast error

About Complexica

Employing almost 100 staff across 4 offices, Complexica is a leading provider of Artificial Intelligence software applications that can optimise sales, marketing, and supply chain decisions. Our investors include MA Financial Group (ASX:MAF), Flinders Ports, and Microequities Asset Management (ASX: MAM). We were founded upon the research of several world-renowned computer scientists, and have commercialised a modularised software platform called Decision Cloud® that empowers staff across multiple business functions to make better decisions. Decision Cloud® is powered by our award-winning Artificial Intelligence engine Larry, the Digital Analyst®:

Research Partnerships

We maintain research partnerships with the Polish-Japanese Academy of Information Technology, the University of Adelaide, and RMIT University, and also have a Scientific Advisory Board that includes international thought leaders in the area of Artificial Intelligence. Our enterprise software employs techniques from a range of fields, including deep learning, predictive analytics, machine learning, Artificial Intelligence, simulation and big data analytics to solve complex business problems and deliver value.

Supply Chain

Complexica can help you address these commonplace challenges through our Demand Planner module of Decision Cloud®, which provides robust and easy-to-use demand planning, forecasting, and analysis capabilities.

Supply Chain

Supply Chain Management

Demand planning is a supply chain management process that allows a company to project future demand and successfully customize the company's production, whether products or services, according to. demand planning is the supply chain management process for forecasting demand, so that products can be delivered reliably and.

Forecasting and Demand Management

Demand forecasting provides insight into your next cash flow so companies can more accurately budget supplier payments and other operating costs, while continuing to invest in company growth. Demand forecasting is the process of making estimates of future customer demand over a defined period, using historical data and other information. Demand forecasting is especially useful for products that have an expiration date, such as in the food or chemical industry. Without adequate demand forecasting, you risk losing money if you produce too many items and have to sell them at a discounted price as their expiration date approaches.

In addition, unnecessary storage costs are incurred when too many products are produced. Demand forecasting is known as the process of making future estimates in relation to customer demand for a specific period of time. In general, demand forecasting will take into account historical data and other analytical information to produce the most accurate predictions. More specifically, demand forecasting methods involve the use of predictive analysis of historical data to understand and predict customer demand to understand key economic conditions and help make supply decisions crucial to optimizing business profitability.

Forecasting and Demand Management

Demand Management

Demand management can also be used to reduce demand. This encourages customers to talk on the weekends rather than during the week to reduce service demand. Demand management is a planning methodology. Companies use it to forecast and plan how to meet demand for services and products.

Demand Management Improves Connections Between Operations and Marketing. The result is closer coordination of customer strategy, capacity and needs. Demand management involves forecasting and planning to meet customer demand. An example of an activity that illustrates demand management is sales forecasting, customer evaluation, and modeling.

Predictive Demand Planning

Rather than using a pre-defined set of rigid models that are based solely on statistical methods, Complexica’s Demand Planner relies on a wide variety of predictive algorithms and techniques that are tuned to your internal sales data as well as external sources and available overlays to improve accuracy.

Based on advanced statistical models and Artificial Intelligence methods such as Deep Learning, Demand Planner can help your organisation move demand planning away from an anecdotal and “gut feel” approach, to a data-driven and market intelligence capability. In particular, we can help you:

  • Reduce the forecast error associated with demand planning
  • Increase DIFOT and service levels to customers
  • Improve stock turns and decrease overall inventory levels
  • Improve reaction time and response to unexpected events (e.g. sudden change in demand requiring additional inventory)
  • Automate manual processes to eliminate human error and key man risk
  • Understand the impact of changes in business rules and constraints (such as lead times, capacity constraints, required inventory levels, etc.)
  • Replace home-grown spreadsheets, which are often opaque and convoluted
  • Optimise and automate the replenishment process across various time periods, product categories, lines, and individual SKUs
  • Understand customer sales trends and patterns

Frequently Asked Questions

When planning for future promotions, one of the manufacturer’s goals is to maximize the “gain” from competitor products (so that consumers switch from a competing product to thier own) and minimize the “loss” from their own product range. If an increase in promotional sales comes at the cost of another one of the manufacturer’s products, this is called cannibalization, which means that consumers have switched from one of our products they regularly buy, to the one on promotion. 

 

Through data analysis, we could create a cannibalization matrix, which is a table that outlines the expected cannibalization effect of certain products when placed on promotion. However, the practical challenges of constructing such a table are significant. Without applying any domain knowledge or business rules, it might be necessary to look up each individual product and calculate its cannibalizing effect on every other product in our range. For most manufacturers, which may sell hundreds or even thousands of products, this would result in a table with tens or even hundreds of thousands of values. While it’s possible to calculate this automatically, there’s no easy way to validate these values without going through them line by line.

A better approach is through the application of human knowledge along with various Artificial Intelligence methods; for example, by implementing human rules based on well-founded assumptions, such as cannibalization occurring across individual categories, we could capture 80% of the expected cannibalization effect with just 20% of the modeling effort, and then complement the cannibalization matrix by additional modifications that result from a deeper analysis of the data using AI algorithms.

To learn more about promotional planning and pricing, watch this supplementary video to Chapter 3 of The Rise of Artificial Intelligence, a recently published book authored by the Complexica team. 

Complexica does not custom-make software applications for each customer, as this approach would be too prohibitive from a cost, time, and risk perspective. Based on almost a decade of research and development, Larry, the Digital Analyst® and the Decision Cloud® platform are software products with pre-existing algorithms, models, workflows, user interfaces, functions & features, integrations, and security controls. Hence, from this perspective, Complexica's software applications can be categorised as enterprise-grade, commercial-off-the-shelf (COTS) products. 

That said, our experience is that most COTS products are unable to handle many customer-specific requirements such as complex business rules set in time-changing data environments, non-linear relationships, and non-standard business processes and workflows, among others. For this reason, the Decision Cloud® platform allows for a "customer-specific layer" to be added on top of the COTS product which caters for unique requirements without compromising the base product (or the ability to upgrade to future versions and releases). Hence, Complexica's Decision Cloud® platform combines the best of both worlds by leveraging the cost and time efficiencies of a COTS product, and the flexibility of being able to handle unique requirements within the customer-specific layer.

No customer data is ever shared, re-used, or re-sold in any way. Each Complexica customer has their own AWS instance where Larry, the Digital Analyst® is trained and configured using that customer's data plus any relevant external data. Customer data is also covered under the provisions of the Confidentiality Clause of Complexica's standard terms & conditions.