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Cello Forecasts
the Future
How Cello Helps
Sales Forecast for a Retailer?

May, 2017 | Smart Logistics Business Unit

1. Introduction
- Importance of AI-based Big Data Analysis
2. Cello Demand Sensing
- What is Demand Sensing?
- Project Case: Sales Forecast for a German Electronics Retailer
- How Accurate was the Forecast?
- What Benefits Does it Offer?
3. How Demand Sensing Helps SCM Planning & Logistics
Execution

4. Closing

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1. Introduction

1. Introduction

Importance of AI-based Big Data Analysis

“Technologies behind the Fourth Industrial Revolution are shaking up

companies across industries,” Klaus Schwab, Executive President of the
World Economic Forum, said in January 2016. “Since innovative companies
have access to research, development, marketing, sales and retail through
digital platform, they will be able to outperform the companies currently
leading the market,” he argued. As Mr. Schwab explained, the Fourth
Industrial Revolution will completely reshape a business paradigm much
greater than the previous three industrial revolutions combined. Today, this
Fourth Industrial Revolution is mostly led by information and communication
technologies such as Artificial Intelligence (AI), Internet of Things (IoT), big
data analysis, self-driving vehicles, robots, shared economy and 3D printers.

AI, in particular, is the key to aggregating and analyzing high volumes of

data. It also creates innovative business values by utilizing new data from
IoT, self-driving cars or smart factories, etc. That is why AI-based big data
analysis stands out the most among technologies driving the Fourth
Industrial Revolution.

The rise of the Fourth Industrial Revolution has brought an era of

convergence in which industry boundaries are increasingly disappearing. In
the logistics industry, too, convergence1) is well underway, with logistics
combined with information communication technologies. Keeping up with this
trend, global companies have started adopting this new convergence logistics
service to increase market share and competitiveness, which raises the need
for Korean companies to come up with ways to respond.

Samsung SDS, too, has launched a demand forecasting service, Cello

Demand Sensing. It provides forecast by adopting AI-based big data analysis.
In this paper, we’d like to introduce Cello Demand Sensing and how it’s
actually been used to forecast sales of a German retailer as many
manufacturers and retailers have shown a keen interest.

1) Logistics Convergence: An intelligent logistics system that aggregates and analyzes data and
suggests the most optimal logistics by adopting AI, IoT, etc.

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2. Cello Demand Sensing

2. Cello Demand Sensing

What is Demand Sensing?

Demand sensing is a forecasting methodology that leverages new

mathematical techniques and analyzes near real-time information on sales
history or prior promotional activities to create an accurate demand forecast.

Cello Demand Sensing is a demand forecasting system that provides weekly

sales forecast for customers by combining Samsung SDS’ total logistics
platform Cello together with its SCM solution technologies and Brightics,
Samsung SDS’ own big data analytics engine.

Brightics supports 126 functions as well as both machine learning2) algorithm

and deep learning3) algorithm.

[ Figure 1. Cello Demand Sensing & Brightics ]

2) Machine Learning: A subfield of artificial intelligence that develops algorithms that can learn
from and make predictions on data
3) Deep Learning: It is a class of machine learning algorithms that use layers of nonlinear
processing units for transformation. In a larger sense, it is part of the broader machine
learning field of teaching humans’ way of thinking to computers
4) Product Lineage: It connects how old and new models are relevant to each other
5) PLC: Product Life Cycle

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2. Cello Demand Sensing

Project Case: Sales Forecast for a German Electronics

Retailer

In this project, we analyzed sales history and previous promotional activities

of a German retailer and suggested the most optimized demand forecast to
make its entire supply chain more efficient.

To do this, we first analyzed three-year sales and promotion history of the

retailer’s 19 products in 428 stores. We also looked at the correlation
between sales and 30 parameters including customer benefits, weather,
holidays, population and level of income and how sales changes in response
to 9 types of promotions such as TV ads, voucher, cashback, etc. Through
the process, we let our forecast engine to analyze sales using machine
learning. We also let the engine to predict sales volume by itself through
decision tree6) algorithms, sort out sales ratio product by product and figure
out consumer purchase patterns. These were all reflected to create a final
forecast.

Then, by comparing a set of sales forecasts with previous actual sales figures,
we selected what was the closest to the actual sales as our final forecast.

[ Figure 2. Cello Demand Sensing Process ]

6) Decision Tree: It uses a decision tree as a predictive model observations about an item to
conclude the item's target value. It is one of the predictive modelling approaches used in
statistics, data mining and machine learning
7) POS: Point of Sales, It refers to the physical location at which end customers make a
purchase (e.g. stores, online shops, etc.)

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2. Cello Demand Sensing

How Accurate was the Forecast?

In Germany, superdeal promotions were held for two weeks from the last
week of November to the second week of December in 2016 (47 th week ~
49th week). During this superdeal period, we carried out a pilot demand
forecasting for 19 types of televisions in 428 stores of the German retailer,
using Cello Demand Sensing.

It turned out that while the forecast by the sales person in charge was 53%
accurate, our Cello Demand Sensing showed 72% accuracy.

Since the pilot forecasting last year, Samsung SDS has been applying
forecasting on a cloud basis to other electronic appliances such as
refrigerators and washing machines. To ensure a consistent and reasonable
forecast, our Cello operation team has a weekly meeting with the client in
Germany. With our forecast, the German retailer plans to adjust inventory to
be sold in stores, while manufacturers use the forecast as their sales strategy
in connection with promotions of its marketing team.

[ Figure 3. Forecast Accuracy of Cello Demand Sensing ]

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2. Cello Demand Sensing

What Benefits Does it Offer?

In the past, you had to put in a lot of time and efforts to analyze a massive
amount of data to forecast demand. Today, however, with advanced
information technologies, it takes much less time and money to carry out
demand forecasting, which leads to fast decision making. Moreover, while
promotions used to be conducted without much consideration to increase
sales in the past, they are now designed and carried out in a more thoughtful
manner based on sales/demand forecast. And that enables companies to
maximize their sales and have more sales opportunities. Also, Cello Demand
Sensing makes it possible for managers to operate their business efficiently
by forecasting demand and ROI.

[ Figure 4. Benefits of Cello Demand Sensing ]

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3. How Demand Sensing Helps SCM Planning & Logistics Execution

3. How Demand Sensing Helps SCM

Planning & Logistics Execution

With Cello Demand Sensing solution, companies can not only forecast sales
but also apply the forecast data to their SCM planning and logistics execution.
It can even be used in adjusting an inventory level for each store, calculating
an optimal inventory, planning how last mile delivery will be executed and
tracking shipments.

For retailers, demand sensing can help increase inventory turnover,

maximizing sales while maintaining an optimal inventory level. For
manufacturers, demand sensing enables them to have a process in place
where automatic replenishment8) kicks in for popular items and orders are
made automatically so that they no longer miss out on sales opportunities.

In short, Cello provides a comprehensive logistics service on a single

platform, ranging from demand forecast to last mile delivery, by combining
SCM planning and Cello’s logistics execution solution.

[ Figure 5. Cello’s Service Scope for Retailers ]

8) Automatic Replenishment: A computerized system that automatically calculates optimal

inventory levels for a retailer and replenishes inventory, thereby reducing stocks at
distribution centers
9) Omni: It connects different shopping channels (online, offline, mobile, etc.) to each other
10) WMS: Warehouse Management System
11) TMS: Transportation Management System

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4. Closing

4. Closing

In this paper, we’ve looked at Cello Demand Sensing, how it’s been adopted
in a project and Cello’s distinctive total logistics service in connection with
logistics execution. Although it can still be new to some of you, we’re certain
that our 4PL service will be of a great help to your business from SCM
planning to logistics execution.

Faced with the Fourth Industrial Revolution, industry watchers are keeping a
close eye on how it would affect each industry. Even at this hour,
convergence of big data and AI continues to evolve in various areas. Now, it
is no longer a choice but a necessity for companies to adopt AI in order to
create new businesses and values. We expect that our AI-enabled Cello
Demand Sensing will become an essential element to advance your SCM and
logistics operation. Furthermore, it will present you a big opportunity to
innovate your SCM and logistics as a whole.

Principal Consultant,
Business Team 1 of SL Business Unit, Samsung SDS
Development of external businesses

Project Experiences
- Applying Demand Sensing to MSD in Germany
Chris Park - LMD Project for Expert in Germany
- Logistics BPO in Europe (WEDC)
Samsung SDS
Business Team 1
chhyun.park@samsung.com

Principal Consultant,
Business Team 1 of SL Business Unit, Samsung SDS
Development of external businesses

Project Experiences
- Applying Demand Sensing to MSD in Germany
Dongyub Lee - LMD Project for Expert in Germany
- Logistics BPO in Europe (EEDC)
Samsung SDS
Business Team 1
buddy.lee@samsung.com

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