Digital Transformation opportunities for the Supply Chain

Digital technology has profoundly changed our daily lives, our social life, our way of working, and in particular our way of consuming.

Product customisation and the long-tail effect

We buy more and more products online on e-commerce sites. We buy lots of standardised products, but there’s also a growing trend towards buying customised products too. We find it easier to buy products that suit our individual needs; products that make us different from others; and products that we are proud to own or consume.

This phenomenon of personalisation is made possible thanks to digital technology. E-commerce allows companies to present an infinite range. Digital consumers can easily use configuration tools to customise their products. The digital rendering of the personalised product reinforces the consumer’s idea that the final product corresponds to what they’re looking for.

The development of personalised products leads to a proliferation of the number of products. Product portfolios today consist not only of leading, high-volume products, but also more and more products with much smaller volumes that meet the expectations of a particular customer segment. So today’s commercial successes are not necessarily assured by high-volume products, or even products that are in the top 3 or top 5 of their category.

This phenomenon of “long-tail” has introduced new challenges for the supply chain: how to meet the needs of thousands of low volume products? How can you manage stock for these products and meet orders, especially given that today’s consumers expect to receive them right away? How can you respond to these orders with a performance equivalent (increased margins, profitability etc.), or even better?

Explosion of “me-too” products and price wars

E-commerce creates a hyper-competitive environment between companies by exacerbating a price war. What’s more, the ‘endless-aisle’ offered by e-commerce effectively means there’s a proliferation of “me-too” products – products that copy leading brands on the market. In this context, it’s vital for companies to maintain and boost sales for their most competitive products.

For many companies, the most often used technique is via promotions. But some aren’t always that effective and value-enhancing. It’s important to ask yourself: “what is the most relevant promotion for each context?” What additional volumes does a promotion bring? What is the ROI for each promotion, taking into account the effects of cannibalisation?

To escape price wars and meaningless promotions, companies must also constantly innovate and launch new products. Despite a lot of uncertainty about the success of any new products and the significant development costs associated with them, launches are certainly a contributing factor to the growth of sales. But how can you detect early on if a new product will be a success or a failure? How can you be agile enough to meet demand when it proves successful? How can you quickly stop any haemorrhage when something turns out to be a failure, saving your launch budget for another potentially successful product?

Our response to the challenges of the digital age: artificial intelligence

The supply chain’s mission is to enable the company to operate all possible businesses profitably. The big challenges related to digital transformation require adapted technologies, all of which aim to meet the demand of each type of product in a more profitable way.

At FuturMaster, we focus our R&D efforts to develop specific solutions to help our customers meet each of these challenges by including Artificial Intelligence technologies.

Improve the quality of sales forecasts

FuturMaster’s R&D is investing in Demand Planning 4.0, which is changing the outlook for demand planning. In this area, we are moving forward on two separate Machine Learning approaches that improve the quality of forecasts:

  • An approach that draws on the expertise and knowledge of our customers, taking advantage of multiple regression methods and the availability of data that influences sales, such as the weather, or the “social media sentiment”. This approach makes it possible to have fairer and more dynamic sales forecasts in line with changes in the influence factors.
  • A pure “data driven”, “evidence-based” approach, based on the availability of data accumulated by the company or made available on the market. This method demonstrates its effectiveness for short-term forecasts, with finer granularities, up to the article in a store.

 

Optimise the return-on-investment of promotions

Our new TPx (Trade Promotions Management) offer will transform the management of promotions activities. Firstly, Machine Learning and Deep Learning algorithms calculate the future promotions volumes in a much more reliable way by taking advantage of the sales data of past promotions as well as the characteristics of these promotions (mechanics, products and customers concerned, dates etc.).

These same technologies also make it possible to calculate and predict the effects of cannibalisation (direct and indirect), and to determine the delivery profiles of each promotion. Predicting promotional effects on sales volumes makes it possible to estimate the performance and return-on-investment of promotions in advance, and thus facilitate better decision-making.

In this area we want to go even further, using artificial intelligence to optimise the overall promotional plan and even recommend promotions (which products, customers, mechanics, etc.) that will achieve the sales and financial objectives of the company.

Gaining agility in launching new products

At FuturMaster’s R&D department, we are also working to significantly improve the planning of new product launches through machine learning algorithms.

New opportunities for clustering and self-determination of launch profiles and sales volumes enable launch forecasts. These methods take advantage of the launch history and the availability of data on the factors that influence launches (characteristics of the product, the store, the launch itself, etc.).

In addition, these forecasts can be readjusted dynamically based on the first real sales, which allows you to adapt the launch plan (e.g. an increase in production, or reallocation).

Take up the challenge of producing customised products

FuturMaster is also interested in the response that the supply chain can bring to the phenomenon of a proliferation of products. The ability to respond to customised product orders is based on component availability and production capabilities. It is necessary both to anticipate upstream needs and to adequately organise resources (materials, machinery and manpower); but also to be able to readjust plans in a highly reactive way in the short term in case of frozen resources. While addressing these two issues, with our Supply Planning solution, we also propose a vertical integration approach between medium-term planning and short-term planning. This integration step is vital to achieve the performance and agility goals that are critical to the successful marketing of customised products.

FM Next Generation at the service of your digital performance

These innovations in artificial intelligence, coupled with the development of new user interfaces, are the cornerstones of our new software offering. “FM Next Generation” is part of our response to supporting the digital transformation of our customers, by providing them with more automatic and dynamic analysis and decision-making capabilities.

 

Contact us

FuturMaster - UK
Apex House
Calthorpe Rd
UNITED KINGDOM
Tel +44 (0)1212 317200
Tel +33 (0)1 46 08 05 45