Sustainable forecasts for sustainable sales

New science project for optimized sales forecasts in the grocery trade

INFORM (an optimization systems specialist), the Zurich University of Applied Sciences (ZHAW) and the Swiss based firm PrognosiX present a science project on the topic “demand forecasts” within the grocery trade. The goals of the project are: to optimize planning processes in order to reduce food waste, improve the availability of products, enable planning of production processes as well as minimize both transport and storage costs. An interdisciplinary team consisting of the Zurich university representatives and the project’s assignees from INFORM and PrognosiX is currently working on the project using mathematical algorithms. Within the ZHAW, there are three research teams involved in the project: the Institute of Applied Simulation, the Institute of Business Information Technology and the Institute of Marketing Management. Their research on the project is sponsored by the Commission for Technology and Innovation (CTI) of the Swiss Confederation.

“We have just accomplished the first project phase, in which data sets provided by Swiss grocery producers and food retailers, have been processed. Based on that data, we have already developed some promising algorithms which have produced very good sales forecasts for the fruit and vegetables variety”, stated Dr. Peter Kauf, the CEO of PrognosiX AG. The basis for the algorithm optimization is the software add*ONE Inventory Optimizer from INFORM. It is an intelligent add-on system which complements existing ERP systems with precise forecasts, cost-optimized order proposals and effective controlling tools. “INFORM offers the mathematically best sales forecasting solution currently available on the market. We use add*ONE’s interfaces in order to bring the already very good add*ONE forecast function to a new level”, as Kauf went on to say.

Today, customer requirements, which the trade must fulfil, are higher than ever. The challenge for retailers is guaranteeing the highest quality and making it available at any time. “We can see great potential in optimizing sales forecasts, especially in the food industry and are happy to work together with PrognosiX and ZHAW for developing a sustainable solution”, says Dr. Ulrich Dorndorf, the Chief Technical Officer at INFORM.

 

Identifying and using relevant influencing factors

Sales forecasts are especially important to the food industry. Special features which must be considered include the evaluation of a large amount of data, such as promotions of certain items, as well as external factors, such as the weather, the day of the week or the consumption behavior leading up to holidays. “The sales of fruits, such as berries, is significantly weather dependent”. Factors such as atmospheric pressure, sunshine duration and temperature play a decisive role in forecasting and make the forecasting process exciting”, claims Prof. Dr. Thomas Ott, managing director of the project at ZHAW.

Optimal evaluation of data sets

The project team is working with data which was provided by Swiss grocery producers and food retailers. Data sets from 2014 are saved in the evaluation system and are being compared to first sales figures from 2015 which are already available. By doing this, the team better understands the advantages of the newly developed sales planning algorithms. These results are crucial for further developing the algorithms.

The team is currently intensely developing a software prototype based on the new algorithms. A plan to comprehensively evaluate the prototype in August 2015 is currently underway. It aims to further optimize the algorithms according to individual commodities and trades. “Our goal is to develop a software system which can be used in a wide range of applications and be integrated in any ERP system”, summarized Kauf. “At the end of the day, demand planners should be able to remain confident having established a solid plan for the next few days.”

Dreams for the future

Apart from the grocery industry, the restaurant and hotel industries profit from optimized forecast tools which reduce waste and effectively predict inventory. The results of the research project have also discovered great potential for the healthcare industry, where external factors also play a significant role in terms of staff planning. The ski season requires that hospitals have good personnel planning, meaning that they will be prepared for extreme situations during this busy time. “Many companies are not yet evaluating relevant data for forecasting and demand planning. As a result, there remains great potential in the fields of logistics and supply chain management”, summarizes Kauf.