Rocket Science Retailing

Floris@fmpadt.nl
http://www.linkedin.com/in/florispadt
Floris Padt
Link Lindquist
@florispadt
Albert Einstein

Life is like riding a bicycle.
To keep your balance,
you must keep moving.

"Anyone who has never
made a mistake has never
tried anything new."

Hunkemoller
Vision
#1 LINGERIE SPECIALIST IN EUROPE
HIGH STREET BRAND, NOT HIGH STREET RETAILER
WORLD CLASS SERVICE

Challenge

Having the right products
at the right place
at the right time
in the right quantities

at minimal cost.


We choose to go to the moon!
We choose to go to the moon,
We choose to go to the moon in this decade and
do the other things,
not because they are easy,
but because they are hard,
because that goal will serve to organize and measure
the best of our energies and skills,
because that challenge is one that we are willing to accept,
one we are unwilling to postpone,
and one which we intend to win,
and the others, too.
We choose to go to the moon in this decade,

not because they are easy, but because they are hard,

because that goal will serve to organize and measure the best
of our energies and skills,

because that challenge is one that we are willing to accept,

one we are unwilling to postpone,
and one which we intend to win,
Start with open source R and R-Studio
using 4000+ packages and integrate later with .
R Core Team (2013).
R: A language and environment
for statistical computing.
R Foundation for Statistical Computing,
Vienna, Austria.
URL http://www.R-project.org/.
snow lpSolve Reorder
Points
ggplot2 class

Reference
Stores

shiny lpSolve Inter-Store
Transfers


forecast fpp Forecasting


shinyapps

4000+



















































The popularity of R is skyrocketing
DC
Lead time
Replenishment +
Transport time
Amste-R-dam
Rob J Hyndman
1000+ Products
Bras 800
Underwear 200
Accesoiries 40

550+ Places
15+ countries
Own, franchise, shop-in-shop
E-commerce
1 new store/week

Volatile demand
Promotions
Seasonality
Weather
Slow moving

NOS Challenge: 95%
DC
5
2
7
Lead time
Replenishment +
Transport time
Reorder
Points
Reference
Stores

Forecasting



How many pieces of an article
should be in a store
to get 95% availability
with a 1:1 replenishment?

Availability
2013
2012
90% availability requires ? pieces
Weekly 70 customers buying 1 product in 1 store, non-volatile
90% availability requires 63 pieces
Weekly 70 customers buying 1 product in 1 store, non-volatile
90% availability requires ? pieces
Weekly 70 customers buying 1 product in 1 store, volatile
90% availability requires 82 pieces, 30% more stock
Weekly 70 customers buying 1 product in 1 store, volatile
the other way round
Top-down

Reorder point based upon
7 weeks of sales by
style/color and store cluster

Distributed to stores and
finally to size using size profiles.


Bottom-up

Reorder point based upon
sales by Store/Article/Day,
less out of stock days.

A probability distribution with
desired availability is input.
Hadley, G., T.M. Whitin 1963
90% availability requires 82 pieces, 30% more stock
Weekly 70 customers buying 1 product in 1 store, volatile
60% 20% 20%
0 1,6 5,6
Source: Inventory Management and
Production Planning and Scheduling
Silver, Pike and Peterson
Reality: Slow Moving
Start with open source R and R-Studio
using 4000+ packages and integrate later with .
R Core Team (2013).
R: A language and environment
for statistical computing.
R Foundation for Statistical Computing,
Vienna, Austria.
URL http://www.R-project.org/.
snow zoo Reorder
Points
ggplot2 class

Reference
Stores

shiny lpSolve Inter-Store
Transfers


forecast fpp Forecasting


shinyapps




Availability
2013
2012
DC
5
2
?
Lead time
Replenishment +
Transport time
Reorder
Points
Reference
Stores

Forecasting



How many pieces of an article
should be in a NEW store
to get 95% availability
with a 1:1 replenishment?

Start with open source R and R-Studio
using 4000+ packages and integrate later with .
R Core Team (2013).
R: A language and environment
for statistical computing.
R Foundation for Statistical Computing,
Vienna, Austria.
URL http://www.R-project.org/.
snow zoo Reorder
Points
ggplot2 class

Reference
Stores

shiny lpSolve Inter-Store
Transfers


forecast fpp Forecasting


shinyapps




Norms for New Store
Average of 12 stores in the same
country having the highest similarity
on BHP

Result

30 stores will be understocked.
Still 19% but a good start.

45 stores will get exactly the right
norm stock (28%).

84 stores start with a slight
overstock by which the real demand
can be identified (53%).

Outliers?
Antwerpen MEIR
Is this an Outlier?
Forecasting
SAP models

R-models



Availability
2013
2012
DC
5
2
7
Lead time

20 weeks
Replenishment +
Transport time
Reorder
Points
Reference
Stores

Forecasting



How can we forecast demand
over at least 20 weeks
to get 95% service level
of our warehouse?

Start with open source R and R-Studio
using 4000+ packages and integrate later with .
R Core Team (2013).
R: A language and environment
for statistical computing.
R Foundation for Statistical Computing,
Vienna, Austria.
URL http://www.R-project.org/.
snow zoo Reorder
Points
ggplot2 class

Reference
Stores

lpSolve Inter-Store
Transfers


forecast fpp Forecasting


shinyapps shiny




SAP
R
Both forecasts
look similar
R
SAP
Real
late summer!
Source: Inventory Management and Production Planning and Scheduling
Silver, Pike and Peterson
1.
2.
Balance Availability against Inventory Cost
a two stage landing resulting in less inventory
Service Level
Estimated 2,5M Gross Sales Value Recovered
(if implemented for all product groups)
Bottom Top
Increase Availability
by setting the right reorder points

Increase DC service level
by mitigating forecast accuracy
with safetystock

Reduce Stock in store
maintaining 95% availability

Reduce safety stock
by improving DC Forecast accuracy

Forecast on Store level ???
Share Forecast with suppliers ???

Early stock out Warning

Scaleability
embarrassingly parallel problems
Felix Baumgartner

Jonathan Trappe
Brand Values & Lessons Learned
in touch
inspiring
Overview of Outcome

Quantifiable results:

Intangible results:
So in touch: control of Stock & Availability
So passionate: with R use complex algoritms
So inspiring: use R with the forecast package
So fun: R: open source, low cost, in memory
So sexy: Shiny Apps in a browser window
Thanks To
TiasNimbas: Prof. A.g de Kok

Monash University Prof. Hyndman

UC Los Angeles Prof. Norman S. Matloff.

CQM Ph.D. Arjen Vestjens

AWS Ph.D. Bart karstermans




Further Reading

http://www.r-fiddle.org/
http://www.revolutionanalytics.com/
http://shinyapps.io/
http://www.rstudio.com/
http://www.rstudio.com/shiny/showcase/



Forecasting
https://www.otexts.org/fpp
http://robjhyndman.com/

http://www.r-project.org/

Community
https://www.coursera.org
www.meetup.com

Books
Retail Marketing
http://www.bol.com/nl/p/retailmarketing/1001004006194984/
Inventory Management and Production Planning and
Scheduling
http://www.amazon.com/Inventory-Management-Production-
Planning-Scheduling/dp/0471119474
Spinger R Series
http://www.springer.com/new+%26+forthcoming+titles+%28d
efault%29?SGWID=5-40356-404-173624787-6991
The Art of R Programming: A Tour of Statistical Software
Design
http://www.amazon.com/The-Art-Programming-Statistical-
Software/dp/1593273843
Forecasting: principles and practice
https://www.otexts.org/fpp