A New Forecasting Technique

(Photo: SAP)

At SAP, the experts from the Center of Excellence Forecasting and Replenishment are responsible for improving the procurement and planning of perishable goods for the retail and consumer products industry. The teams develop retail software using the demand chain management approach, where goods are supplied in line with the current demand of consumers. The results are lower stocks, improved availability of goods, and reduced spoilage of perishables. But for this to happen, exact sales forecasting and precise management of the supply chain are required. Retailers ultimately benefit in the form of reduced costs as well as increased customer satisfaction.

The Swiss Coop supermarkets have been using the sales-based ordering functions within the SAP Forecasting and Replenishment application since 2006. Initially, the software was deployed for drinks replenishment, but it was later expanded to cover a broader range of items. Now, it is used for more than 80 million location products – including frozen foods, cleaning agents, and fresh goods.

Sales forecasting at Coop Switzerland

Since 2012, SAP has been working on a pilot project with Coop supermarkets in Switzerland to optimize the existing forecasting method for perishables. In the past, due to the high volume of data, an approach was used for forecasting and replenishment that essentially worked on a weekly basis. For most assortments, this provided sufficient quality. However, when it came to perishable items such as fruit, vegetables, meat, and fish, Coop saw room for improvement.

The experts from the Center of Excellence Forecasting and Replenishment took up the challenge and developed New Forecast for Fresh Items. The new solution enables forecasts to be made on a daily basis. It is hooked up with SAP Forecasting and Replenishment in such a way that users hardly realize they are using the new forecasting method – apart from the improved forecast quality. As a result, MRP controllers can continue to work in the entire perishable and non-perishable goods assortment using their tried-and-true sales-based ordering environment.

Next page: Success of the Coop project

During the customer project, the meat range and ready-to-eat meals with limited shelf life were tested in six Coop supermarkets. The results revealed that the forecasting and replenishment quality remained stable and at an extremely high level, while the expectations of the key performance indicators were exceeded by far. This year, Coop plans to roll the solution out to other product groups with perishable food and to more stores. Ultimately, the goal is to deploy the new solution company-wide.

Next steps: real-time forecasts

While the New Forecast for Fresh Items feature is offered only as a customer-specific enhancement of SAP Forecasting and Replenishment, the forecasting methods in it will be available in the new SAP product Consumer Activity Repository under the name SAP Unified Demand Forecast. Furthermore, SAP Unified Demand Forecast will run on the SAP HANA platform, which will enable real-time forecasts and simulation scenarios with large data records.