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Increasing Demand Insight and ForecastAccuracy with Demand Sensing and Shaping

Ganesh Wadawadigi, Ph.D.VP, Supply Chain Solutions,SAP

© 2013 SAP AG. All rights reserved. 1

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Agenda

Industry Trends and Business Drivers

SAP Addressing the Needs

Getting Started

Wrap-Up


Demand Network has Inherent Data Latency

Multiple layers in the demandnetwork leads to data latency

DemandSignalLatency

DemandGranularity

Multiple aggregations across thedemand network leads to loss ofgranularity


DigitallyConnected

SociallyNetworked

BetterInformed

79% of customers spend atleast 50% of total shopping timeresearching products online(Powerreviews)

53% of customers abandonedan in-store purchase due tonegative online sentiment(Interactive Advertising BureauReport)

59% of customers are willingto try a new brand to get bettercustomer service (AmericanExpress Global CustomerBarometer)

Empowered Customers are Changing the Rules


ProductLaunchFailures

PromotionalEffectiveness

20% lost sales due toproduct out of stock (GS1)

27% loss of sale due toproduct wanted not availablein assortment (Q&A Research& Consultancy)

75% product launches fail…(AMR)

-19% average ROI on tradepromotions (Capgemini)

Business Drivers to Address Consumer Demand andBehavior

Decline inMarketShare

10% decline in marketshare on average due torecurring out of stock(Journal of BusinessLogistics)

BrandSubstitution

82% of consumers willsubstitute and switch brandsdue to an out of stock product(Marketing Science Journal)

PriceSensitivity

52% of consumers agreethat the price of a product ismore important than brandnames (dunnhumby)

LostSales


DigitallyConnected

Need for Demand Sensing & Shaping Capabilities

Deep Insights into CustomerNeeds

Comprehensive Market ShareAnalysis

Predict Demand and OptimallyPosition Supply

1

2

3


Agenda



Getting Started

Wrap-Up


Aggregated Demand Planning Needs to be Augmented

Collaborative DemandPlanning

Optimize forecasts andgenerate a consensus

demand plan

Supply NetworkPlanning

Optimally plan supply anddeploy inventory to meet

demand plan

APO-DP APO-SNP

Demand Signal Management

Enterprise Demand SensingCapture Demand Signals

Collect, harmonize, enrichall external and internaldemand signals into asingle source of truth

Analyze Demand

Develop comprehensivemarket and demand insights

Predict Demand

Granular forecasting basedon demand pattern recognition


Cross-functional Process View

Marketing Planning and ResourceManagement

DemandSensing and

Shaping

Sales andOperationsPlanning

Sales Planningand Performance

Management

Finance

Marketing

Sales

Supply Chain Management Reviewand Analysis

DemandReview

CollaborativeDemandPlanning

DemandSensing

DemandSignal

Capture

Analyzeand

ShapeDemand

Marketing Planningand ProgramManagement

Marketing Analyticsand Performance

Management

SalesPlanning andMonitoring

Output to Supply Processes

Supply ChainSalesMarketing


Agenda



SAP Demand Signal Management

SAP Enterprise Demand Sensing

Getting Started

Wrap-Up


SAP Demand Signal Management on HANA

SAP Demand Signal Management is the enterprise application for integrating all relevantdemand signals (internal and external) to a single source of truth

RetailerPOS

SocialMedia

Market Researchdata (e.g. Nielsen)

Distributor/Wholesaler

SAPBusiness Suite


Linking additional externalinformation (e.g., weather)

DEMAND RESPONSE

Leverage data in enterprisebusiness applications

DEMAND & MARKETVISIBILITY

Increased insights withenhanced analytics


Scalable and Holistic Approach to Leveraging Value ofDemand Signals with DSiM

External & InternalDemand Signal Upload

DataHarmonization

1

2

34

5

6

Data Cleansing& Validation

Demand DataEnrichment

Integrate toDemandResponse

DemandInsights


Benefits of a Single Source of Demand Signals

U.S. Canada U.K.

NielsenMarket ResearchTracking Data /Retail Panel

Wal-MartPOS Data

WalgreensPOS Data

Category 2

Category 2

1

4

5

Category 2

Category 1

ERPInternal Data

IRIMarket ResearchTracking Data /Retail Panel

Category 2

Category 1

Category 2

Category 1

Category 2

Category 1

Category 2

22

Category 2

Category 1Category 2

Category 2

Category 1

BrandPerformance in

U.S.Brand items spread

across two categories

“Local“ Market Share

1 Brand MarketShare in N.A.

Market Research TrackingData from different

providers

“Regional“ Market Share

22

SalesPerformance in

Canada“Sell-In vs. Sell-Out“

comparison

Out-of-Stock Analysis

5

SalesPerformance of

WalmartCross country view

“Customer language”

4

CategoryManagement

Category Managementfor Walgreens in U.K.

3

Category 2(Incl. competitor’s

POS data)

Category 2

3


Select DSiM Use Cases

PromotionEffectiveness

Track promotion participation per store

Identify Top/Bottom 10 selling stores

Measure variations in Promoted Price Market ShareAnalysis

Monitor market trends, market sizeand competitor dynamics

Identify root causes for market sharedeclines (e.g., new competitorproduct)

ForecastAccuracy

Increase forecast accuracy byincluding POS data in the DemandPlanning process

Analyze historic sales and promotionsfor planning insights

SalesAnalysis

Analyze demand data from differentsources to spot trends

Analyze historical sales, and productlisting to adapt sales strategy

Switch between internal and external(e.g., Retailer) views

Out of StockReduction

Quickly identify stores with out ofstock and take mitigating action

Monitor Inventory levels across yournetwork and reduce carrying costs Product Launch

Success

Track store sales, distribution, priceand promotions for new products

Ensure stock availability at stores anddistribution centers


Embedded Analytics Delivered with DSiM

Function Roles Analysis

Sales Key Account Manager / Sales DirectorSales AnalysisPromotion AnalysisOn shelf Availability

Marketing Marketing Director / Product Manager Market Share AnalysisProduct Launch

Supply ChainManagement

Head of Logistics / Supply Planner /Demand planner

Out of stock AnalysisInventory Analysis

Pre-defined analytics(with the option to define and adopt new additional analytics)

Data analysts can leverage DSiM data with predictive and data miningalgorithms from SAP Predictive Analytics

IntegrateSocialMediaData


SAP Demand Signal Management Demo


Build Your Own Analytics – SAP Business ObjectsExample: Linking Sell-Out Data with Weather Data


Build Your Analytics – SAP Predictive AnalyticsExample: Store Cluster Analysis

Cluster 3Sales revenue: LowAverage number of Out of Shelfoccurrences: MediumAverage number of Out of Stockoccurrences: MediumInventory: LowNumber of promotions: High

Possible reasons/actionsPromotion not efficient enough

Strong competitorsin the neighborhood:start a marketcampaign?

Increase the inventory level?Un-list the product?Store visit to find the root-causes


Agenda




SAP Enterprise Demand Sensing

Getting Started

Wrap-Up


SAP Enterprise Demand SensingSense Short-Term Demand Patterns

Short-term Forecast Issues IncreasesInventory and Reduces Service Metrics

Enterprise Demand Sensing

Predict daily demand requirements

Apply pattern based forecasting logic forshipment and fulfillment

Sense downstream demand using external datapatterns (Planned Innovation)


EDS Identifies Optimal Blend of Inputs to Compute Short-Term Forecasts

Adjustments

Disaggregation

Forecast patterns

Shipment patterns

Open order patterns

Optimal blend

Open ordercorrection

Predicted futurebias correction

• Daily outputs for executionsystems

• Aggregated weekly ormonthly values for planningand reporting

• Pattern Prediction

• Forecast feed to SNP forimproved deployment

Output

Optimal weighting

Pattern recognition


Benefits Enabled by EDS

Improve short-term forecasts by 15-50%

Access actionable insights

Increase demand agility

Reduce inventory 5-8%


Agenda



Getting Started

Wrap-Up


Putting it all Together – Demand Sensing

ERP

DemandSignalMgmt

APO (Demand Planning)

S&OP

EnterpriseDemandSensing

Master Data,Delivered orders

Downstreamdemand signals

(Planned Innovation)

Forecastadjustments

Master Data,Delivered ordersOpen orders

Forecast

Short-TermForecast

S&OPForecastForecast


Social Media


APOSNP


Roadmap to Business Value

DSiM

EDS

Short-term Forecastsfor Optimal Inventory Deployment

ExternalDemandSignals

InternalDemandSignals

DownstreamDemand Insights

Solution Today Planned Innovation

Demand Insights withenhanced Short-term Forecastscombining internal & external

demand signals


Putting it all Together – Demand Shaping

More precise TPO forecasts using demand data (POS, syndicated, internal)

Enables SAP TPO to optimize promotion tactics

Timely insights in promotion performance during Retail Execution and Post-Evaluation

Insights in promotion performance with sell-in and sell-out data

Ensure performance of the participating stores and products while the promotion is still running

Ensure On-Shelf-Availability during promotion execution

SAPDemandSignal

Management SAP Trade PromotionManagement

SAP Trade PromotionOptimization

Cleansed andharmonized downstream

demand signals Forecast

Promotion Data


Partner Ecosystem and Simplifying Consumption

POS Data Acquisition Partners(SAP ICC Certified)

DSiM Implementation Partners

Cloud offering from SAP Services

Out of the box adaptorsfor 300+ global Retailers

Pilots on SAP HANA Enterprise Cloud (HEC)http://scn.sap.com/blogs/SCM_HEC


Agenda



Getting Started

Wrap-Up


Where to Find More Information

• http://www.saphana.com/community/blogs/blog/2013/11/27/beiersdorf-leverages-hana-and-sap-demand-signal-management-to-tell-stories-from-their-data-that-marketers-love-to-read

• Blog and video on customer success story for DSiM

• http://www.saphana.com/docs/DOC-3596• Solution Brief for DSiM

• http://service.sap.com/rds-dsim• Rapid Deployment Solution (RDS) for DSiM

• http://www.sap.com/solution/lob/scm/software/enterprise-demand-sensing/index.html

• Overview and introductory video for EDS

• http://www.sap.com/bin/sapcom/downloadasset.improve-short-term-forecast-accuracy-with-a-clear-view-of-demand-pdf.html

• Solution Brief for EDS


Key Takeaways

• Increase demand visibility downstream in the demand network bycapturing and analyzing demand signals

• Improve success of new product launches with increased customerinsights

• Increase market share with holistic and integrated view of market trendsat a local, regional, and global level

• Improve trade spend by analyzing store-level merchandising complianceand performance

• Improve forecast accuracy by predicting short-term demand patterns

• Boost sales by predicting and reducing out-of-stocks with demandpattern and trend recognition

• Lower expediting and inventory re-positioning costs with improvedshort-term forecasts

Thank You

Contact information:

Ganesh Wadawadigi, Ph.D.VP, Supply Chain SolutionsSAP [email protected]


© 2013 SAP AG. All rights reserved.

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