© 2006 oracle corporation – proprietary and confidential
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© 2006 Oracle Corporation – Proprietary and Confidential
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Sense, Shape and Respond to Demand
John BermudezSenor Director, SCM Product Strategy
© 2006 Oracle Corporation – Proprietary and Confidential
The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.
© 2006 Oracle Corporation – Proprietary and Confidential
Demantra Demand Management
Enables real time demand sensing and shaping …
Sense demand real-time
Improve forecast accuracy
Shape demand for profitability
Evolve to real-time sales and operations planning
© 2006 Oracle Corporation – Proprietary and Confidential
Improve Forecast Accuracy
• Engine supports all statistical models - Complexity is hidden for casual users but can be fine-tuned by statisticians
• Self-tuning engine
• Better than best-fit model with unlimited causal factors
• Use key accuracy metrics– MPE, MAPE, WMAPE (Weighted
MAPE)
Self-Tuning Forecasting Engine
PhD in a box: advanced statistical models
Built-in key accuracy metrics
Designed for planners, not programmers (“PhD in a box”)
© 2006 Oracle Corporation – Proprietary and Confidential
Improve Forecast Accuracy
• Mixed models used in same time series adjust for multiple causal factors including seasonality, market trends, and promotions
• Each model contributes different forecast characteristic to the overall model
• Automatic model selection provides improved accuracy of “best fit” approaches
– One forecast based on multiple models instead of only using best-fit model
– Self-tuning engine
• Forecast trees automatically find level with statistically relevant data
– Forecasts stored at lowest level– Proportion rules applied when necessary
• Can incorporate external information such as weather, market drivers, forward indicators, and competitive data
Causal Analysis
Outlier Detection
Promotion Events
Seasonality
Cyclical Patterns
Trend
Historical data
Bayesian Estimator
Forecast
Multiple causal factors
Combined model
Bayesian Optimizer
Leverage Advanced Forecasting and Demand Modeling option
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Automatic Short/Long Term Forecast AccuracyMixed models automatically adapt in single, precise forecast
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Forecast
Actual
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Model 2 Model 4 Model 2 Model 11
© 2006 Oracle Corporation – Proprietary and Confidential
MAPE – Mean Absolute
Percent Error
Improve Forecast Accuracy
MPE - Forecast Bias WMAPE – Weighted MAPE by
revenue, cost, and so on
Built-in accuracy metrics
© 2006 Oracle Corporation – Proprietary and Confidential
The Difference is in the Details
• Demand history and causal factors maintained at lowest level
• Coefficients calculated and maintained at the lowest level for which there is demand history
• Forecasts and promotion predictions reflect local, regional, product group customer, time period, sensitivity, and so on
• Demantra approach yields most granular analysis of demand for more accurate forecasts
Product/Group
ItemItem Item
Item at a Customer
Item at a Customer/Ship-to A
Item at a Customer/Ship-to B
Demand history Promotion LiftSeasonalityCannibalizationOther Causal Factors
Demand history Promotion LiftSeasonalityCannibalizationOther Causal Factors
Per time period (week/day/month)
Granular causal factors and coefficients
© 2006 Oracle Corporation – Proprietary and Confidential
Demantra Demand Management
Enables real time demand sensing and shaping …
Sense demand real-time
Improve forecast accuracy
Shape demand for profitability
Evolve to real-time sales and operations planning
© 2006 Oracle Corporation – Proprietary and Confidential
Shape Demand for Profitability
• New products present forecasting challenges– Limited or no demand history for a given item
– May combine characteristics of several previous products
– Price points, changing market conditions may be different
– Product demand changes over product life cycle
Chaining
New Product C = 30% Product A + 75% Product B
Shape Modeling
•Apply shapes, scaled for volume and time
•Re-scale base on initial demand data
Attribute-Based Forecasting
Model new item based on past behavior of other items with similar attributes
Accurately forecast demand for new products based on existing data
© 2006 Oracle Corporation – Proprietary and Confidential
Shape Demand for Profitability
Derive forecast for new product and adjust forecast based on actual demand
Automatically detect outliers
View demand of comparable products based on characteristics
Accurately forecast demand for new products based on existing data
© 2006 Oracle Corporation – Proprietary and Confidential
Shape Demand for Profitability
• What incremental volume will result from a marketing program?
• How will it impact the sales of other products?• How does a marketing program at a brand or
product family level impact a specific item?• What were the indirect effects such as
cannibalization and consumer stockpiling?• What is the ROI on my marketing and trade
spending?• What is the predicted impact of future activity?• How does a promotion impact shipments and DC
replenishments?
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1000
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Period 1 Period 6 Period 11
Cannibalization
Pre- and post-effects
Competitive switching
Category growth
Baseline
Actual
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1500
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Period 1 Period 6 Period 11
Ca
se
s
Cannibalization
Pre- and post-effects
Competitive switching
Category growth
Baseline
Actual
Past Future
Leverage Advanced Forecasting and Modeling to understand the real impact of promotions and sales incentives
© 2006 Oracle Corporation – Proprietary and Confidential
Shape Demand for Profitability
• Baseline versus incremental volume– Provides decomposition of incremental volume from advertising,
promotions, or sales incentives
• Granular lift analytics – Incremental volume lift coefficients maintained at lowest level– Localized promotion analysis– Allows shipments/replenishments to be adjusted by ship-to location
• Cross product and customer effects– Determines cross-product cannibalization impact – Adjusts forecasts for product and customer cannibalization
• Configure system for assumption based forecasting
– Structured tracking and categorization of forecast adjustment reasons, such as market and geopolitical changes
– Evaluation of impact on demand as driver for future forecasts– Examples
Semicon: forecast based on chip design wins High-Tech: forecast based on probability of winning an opportunity Life Sciences: long-term forecast based on drug approval and
patent regulations
Baseline
Incremental
Competitiveswitching
Long termgrowth
Pre and Postpromotion
effect
Cross productcannibalization
Typical Demantra AFDM
Baseline
Leverage Advanced Forecasting and Modeling to understand the real impact of promotions and sales incentives
© 2006 Oracle Corporation – Proprietary and Confidential
Demantra Demand Management
Enables real time demand sensing and shaping …
Sense demand real-time
Improve forecast accuracy
Shape demand for profitability
Evolve to real-time sales and operations planning
© 2006 Oracle Corporation – Proprietary and Confidential
Evolve to Real-Time S&OP
Customers
Suppliers
Develop predictable business plans
Shape demand to meet financial goals
Align supply chain to support plan
Monitor performance to plan
Shape demand to close gaps
Drive decisions into ERP
Finance
Supply Chain Sales
Marketing
Profitably balance supply, demand, and budgets
© 2006 Oracle Corporation – Proprietary and Confidential
Evolve to Real-Time S&OP
• Seeded templates for S&OP collaboration
– Seeded consensus planning worksheets– Easily tailored to your business
• Configurable and extensible– Collaborate at any level
• Manage by exception instantly– Exceptions and visual cues easily point to important
issues immediately– Document all assumptions with a complete audit trail of
decisions taken– Leverage POS data to alert planners to exceptions real
time (versus batch month by month)
• Integrated– Seeded data streams for data commonly used in the
process
Profitably balance supply, demand, and budgets
© 2006 Oracle Corporation – Proprietary and Confidential
Evolve to Real-Time S&OP
• Continuous real-time process– Simulate demand and supply strategies– Analyze multiple business scenarios– Achieve consensus on plans through internal
collaboration– Generate and analyze exceptions– Use workflow to automate process
• Adaptable – Custom demand and supply streams– Multi-dimensional– Extensible hierarchies and dimensions– User-defined reports and exceptions
Highly interactive simulation and analysis
© 2006 Oracle Corporation – Proprietary and Confidential
Inputs display from entire collaboration
group – Finance, Marketing, Operations,
Key Customers and Suppliers
Integrated approval workflow process
Each S&OP participant has a configurable role-
based view
Review historical accuracy for each
input
Evolve to Real-Time S&OP
© 2006 Oracle Corporation – Proprietary and Confidential
Achieve Incremental Value
Demand Management
E-Business Suite Advanced Planning
Inventory Optimization
StrategicNetwork
Optimization
AdvancedSupply Chain
Planning
PredictiveTrade Planning
and Optimization
Real-TimeSales and
Operations Planning
Collaborative Planning
ProductionScheduling
Demand variabilityand forecast error
Demand scenarios
Promotional lift anddecomposition
Range forecast andforecast accuracy
• Shipment history• Booking history• Sales forecast• Manufacturing forecast• Items and categories• Organizations• Customers• Calendars• UOM and currency conversions• Price lists• Hierarchies (product family and
product category, time, ship from, geography, customer, demand class, sales channel)
Demand scenarios and priority
Implement additional Advanced Planning components quickly by leveraging the same foundation
© 2006 Oracle Corporation – Proprietary and Confidential
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Customers
© 2006 Oracle Corporation – Proprietary and Confidential
Company• Leading manufacturer of medical devices• Manufactures more than 25,000 SKUs and operating from 25 plants and office around the
world$1 billion in revenues, operating worldwide
Planning problem solved• Aligned customer demand with supply chain planning
Unique aspects of implementation• Integrated with JD Edwards ERP• Supports the companies many new product introductions with improved forecast accuracy
• Increased forecast accuracy by 5-10%• Increased customer service levels• Reduced inventory by 8%• Enabled a comprehensive S&OP process
Live on Demand Management
DeRoyal Industries
© 2006 Oracle Corporation – Proprietary and Confidential
Company• Leading producer of juices and jams
Planning problem solved• Promotion planning synchronized with demand planning
Unique aspects of implementation• Sales reps drive forecasting process from trade promotion planning process • What-if scenario planning enables sales reps to test promotion before selecting it
• Increased forecast accuracy at SKU level • Enables trade promotion planning to be integrated with RT S&OP• Reduced supply chain costs• Improved HQ and sales planning productivity
Live on Demand Management, Trade Management
Welch’s
© 2006 Oracle Corporation – Proprietary and Confidential
Company• $1 billion in revenues, operating worldwide• Manufacturing plants in China• Leading provider of cordless phones and electronic children’s toys
Planning problem solved• Real-time S&OP process driven by one demand number
Unique aspects of implementation• Generates forecasts from customer POS data • Compares customer and generated forecasts and routes exceptions to planner, sales
representative, or customer
• Increased order fill rate from 55% to 95%• Increased inventory turns by 100%• Reduced price protection claims by 40%• Reduced logistics costs by 65%
Live on Demand Management, Real-Time S&OP
VTech
© 2006 Oracle Corporation – Proprietary and Confidential
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Summary
© 2006 Oracle Corporation – Proprietary and Confidential
Oracle Demantra Demand Management
• Sense demand real-time– Sense demand more frequently, closer to the point of consumption– Capture demand and forecast at more granular level (store, shelf,
attributes, product characteristics)– Achieve consensus demand number more quickly by involving all
constituents at the same time, including customers– Quickly identify and react to demand changes and exceptions
• Improve forecast accuracy– Leverage advanced statistics for more accurate demand number– Use any combination of quantitative or qualitative data to establish your
base line forecast– High precision statistical forecasting, no statistical background required –
Superior Bayesian-Markov forecast analytics– Forecast based on attributes and characteristics– Leverage Advanced Forecast Modeling for promotion lift decomposition
and causal analysis
• Shape demand for profitability– Plan new product introductions– Plan promotions and sales incentives– Identify cross selling opportunities
• Evolve to real-time S&OP– Profitably balance supply, demand, and budgets
Shipments
Marketing
forecast
Order
history
CHANNEL DATA
Customer
sales
CollaborationWorkbench
Demand Hub and Seeded Worksheets
Real-time demand sensing and collaborative consensus forecasting
© 2006 Oracle Corporation – Proprietary and Confidential
Oracle Demantra Demand Management
Eliminatespreadsheets
Manage rolling forecasts
Collaborate with all constituentson one number
Use basic statistics, alerts, andseeded worksheets
Tailor worksheets for individual users
Leverage POS and channel data
Forecast new product introductions
Collaborate with customers
Use advanced statistics and causal factors
Complex alerts and custom worksheets
Forecast based on attributes and product characteristics
Compute promotional lifts and analyze impact of demand drivers
Assumption based forecasting
From less complex to best in class
Manage rolling forecasts
Collaborate with all constituentson one number
Use basic statistics, alerts, andseeded worksheets
Tailor worksheets for individual users
Leverage POS and channel data
Forecast new product introductions
Collaborate with customers
Use advanced statistics and causal factors
Complex alerts and custom worksheets
Manage rolling forecasts
Collaborate with all constituentson one number
Use basic statistics, alerts, andseeded worksheets
Tailor worksheets for individual users
Start anywhere
Evolve at your own pace to a best-in-class solution
© 2006 Oracle Corporation – Proprietary and Confidential
Proven, scalable demand management solution
Integrated demand, supply, and sales and operations planning
Designed for planners, not programmers
Integrated performance management
Why Oracle !
© 2006 Oracle Corporation – Proprietary and Confidential
AQ&Q U E S T I O N SA N S W E R S
© 2006 Oracle Corporation – Proprietary and Confidential