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White Paper
Context-Based 4casting (C-B4) Ltd.
Abstract:
C-B4 provides automated data-analytics solutions for retail systems. C-B4 applications include demand sensing, anomaly detection in sales data, forecasting control and validation, optimization of inventory levels including out-of-stock & slow moving items, smart classification of products and services, analysis of stores potential and root-cause analysis for demand changes. C-B4 tools identify hidden patterns in Key Performance Indicators (KPIs) in retail data.
March 2012
Table of Contents
1. Solution Overview 2. About C-B4 3. Background to the C-B4 Solution
3.1 3.2 Enhancement and control of forecasting systems SAS Proof of Concept
3 4 4
4 5
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7 8 10
5. Summary
5.1 Comparison with Existing Technologies
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6. Contact Details
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1.
Solution Overview
Context-based 4casting (C-B4) Ltd has developed a new technologycontext-based predictive analyticswhich detects anomalies and correlations in a unique way, much earlier than traditional performance-management applications. This useful early-warning signal saves analysts precious time when refining demand forecasting and fine tuning production-rate and supply-chain parameters, allowing the setting of inventory levels to cater fully and effectively to the actual demand. The new technology leads to a significant increase in the accuracy of the supply-demand metrics. It reduces the risks and costs associated with out-of stock, slow-moving demand items and high levels of safety stock. More importantly, the new C-B4 technology allows modeling and analysis of data patterns in KPIs (Key Performance Indicators) of retail data, such as selling events, holidays, promotions, relations among SKUs, complementary or cannibalism effects, temporal dependencies, customer and product profiling, etc. C-B4 patented technology provides executives and analysts the unique opportunity to analyze and reveal hidden relationships between KPIs embedded within their existing operations and business data and between different products and categories. Using the C-B4 engine to model operations and business data, it is now possible to achieve the high level of analysis required in today's competitive marketplace. Implementing a range of applications, C-B4 solutions transform raw data into valuable business information by identifying hidden relationships and predicting anomalies early. Traditional software monitoring tools often have the following shortcomings:
They find anomalies too late. They do not detect many hidden anomalies that affect system performance. They do not support a pattern based root-cause analysis to better understand what
corrective action is needed for a network.
They cannot handle the huge amounts of actual demand data. For example, they
cannot provide a unique model for each product in a supply chain, and thus cannot distinguish between what is important and what is not.
They are based largely on traditional models that use unrealistic assumptions. They rely on specific behavior patterns or on a limited set of models. Most significantly, they do not take into account changes in the behavior of the
patterns, but instead focus on data thresholds that may trigger an alarm too late. The C-B4 solution overcomes all these shortcomings. Section describes the 4 suitability of the C-B4 solution for demand-forecasting systems.
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2.
About C-B4
The underlying, patented theory behind C-B4 solutions is based on rigorous and extensive R&D work performed over the past decade in the Faculty of Engineering at Tel Aviv University in Israel. Context-based 4casting (C-B4) Ltd was founded in September 2007 by a group of engineering professors. The C-B4 team includes experts in data mining, information systems, and algorithmic design (third-degree level). All team members have post-secondary degrees, with extensive experience in industrial organizations. Three months after the company's establishment, C-B4 sold its first predictive-analytics solution to Cellcom Israel (NYSE:CEL), a leading mobile phone company. Cellcom continues to implement C-B4 applications to control and monitor its network. In parallel, C-B4 has also developed solutions for the retail industry that focus on:
Enhancement and control of forecasting systems Analysis and optimization of inventory levels Classification of products, clients and services Evaluation of store potential Root-cause analysis of hidden patterns among products, such as cannibalism and complementary effects
C-B4 ran several successful analytic projects in large retail companies. For example, a Product Manager at a global retail software company noted: We did an internal test of the C-B4 engines results versus the (company) clustering engine, and it proved that the C-B4 clustering and pattern analysis technology can significantly improve our current forecasting results. C-B4 has several projects and joint ventures with international companies such as General Motors, Applied Materials, and Proctor and Gamble. C-B4 is cooperating with SAS and with Oracle Israel.
3.
3.1
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Traditional systems are based on historical information and use statistical models to generate a stock forecast. The level of confidence we have in this forecast determines whether we will act according to the predicted value or not. Often, the confidence level of a prediction is not as high as analysts may desire, and certain correctionseither human or automatic proceduresare needed. In addition, retail or vendor management must deal with the delivery of hundreds or thousands of products, goods, and services, and it is impractical for them to monitor all the forecasts all the time. The C-B4 solution provides a reliable indication of where to look and where to direct ones efforts to improve the accuracy of demand forecasting. The unique C-B4 technology enables us to discover crucial information about historical data and the way a prediction was made based on that data. C-B4 technology monitors and models patterns of data used to generate prediction values. It can identify cases where although the data values are acceptable, the patterns of data prior to the "prediction" event indicate some abnormality. This information is used to generate warning signals, prompting us to examine the demand forecasts more closely, and to employ further refinement algorithms to them.
3.2
Provided early detection of anomalies in data patterns, which were the source for the
generated estimation.
Directed the users to understand the root-cause of the low level of confidence given to
a prediction by a traditional approach. C-B4 provided early predictions of problematic forecasts that could be dealt with in real time by a product analyst. Some of these problems could have been detected by human interference, but this would have been extremely time-consuming. The C-B4 solution accurately identified the time of the change point in the data, enabling quick root-cause analysis.
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The following figure illustrates a real example for controlling a demand-forecasting system. The red dots (circled at the top right) provide an early-warning indication that the forecast model is no longer valid for the considered product. A substantial time before the actual sales (marked by the black dots across the graph) exceed the forecast threshold, the C-B4 early-warning indication has already anticipated a problem.
Figure 1: Real-life prediction of an anomaly (a few days before the actual event)
4.
There is an assumption regarding some known distribution model, and historical data
is used to extrapolate future estimations.
The way by which "irregular values" are treated is not always clear. Many times they
are excluded so as to avoid deviations in the generated values. Other times they are simply smoothed out.
C-B4 can dramatically improve the level of confidence, since its unique technology is based upon modeling the actual pattern of the historical data used to generate the forecasts. C-B4 context-based monitoring is designed to directly indicate exceptions, thus reducing the time taken to detect and respond to changes and to produce accurate short, medium, and long-term forecasts. Identifying abnormalities in the actual way any prediction model worksby relating to the very specific demand pattern of each productgives range of possible actions to be implemented by the demand analysts. The first distinguishing fact about the C-B4 methodology is that even if all values are within "acceptable" limits, and thus taken into consideration by a standard prediction module, C-B4 can detect whether the pattern of the data is abnormal, and indicate whether special care is needed for the specific case. Another achievement of C-B4 is that since the user looks into the very heart of each products demand pattern, additional information regarding the demand may be manifested. This information can be of business value and enables the user to extract more competitive advantages over other forecasting systems. An overview of C-B4 technology Smart Forecasting is presented in the following figure.
4.1
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C-B4 technology learns and models the demand data of each product. The actual demand level of an individual product or service is monitored. If provided, this can be done with KPIs like purchase location, quantity, time, price, stock at hand, and more. For each product, a specific model is generated, taking into account the pattern of all these parameters jointly. The C-B4 monitoring module issues alerts regarding exceptions and residual patterns. These elective indications and their corrective actions (either human or automatic) lead to more accurate forecasts. These forecasts form the basis for analyzing actual demand versus the refined forecast for individual products. C-B4 automates the process of analyzing complex demand patterns from multiple sources. By directing the user to exceptions, C-B4 greatly reduces the time taken to detect and respond to changes and to produce accurate short, medium and long-term forecasts. Context-based monitoring can be used to: Monitor complex demand retail chains, involving seasonality, time of day, place of purchase, other SKUs sales, events such as holiday and promotion, and more factors. Detect changes in demand pattern, which are exceptions that require special care, for example, the beginning of an out-of-stock situation, pick sales, safety stock too high, and slow-moving inventory items. Find anomalies in KPI correlations, even when the KPIs themselves behave normally, between products, categories, point of sales, client types, and more. Pinpoint the generated forecasts that require refinement out of hundreds or thousands of monitored products. The monitoring of single product or service:
Supports for both slow and fast-moving SKUs. Manages multiple KPI metrics of demand for a single product, category or service. Gives higher accuracy and supports dynamic manufacturing/inventory policy in line
with real demand, especially with many exceptions. C-B4 may be applied to:
A single product or multiple product demand forecasts A single product demand forecast for a specific sale point or in multiple sale points A design of service providers (for example, a call centers or cash registers) Many more situations
The cost effectiveness of C-B4s higher accuracy and optimized forecasting stems from less dead inventory, fewer out-of-stock situations, and in general, a higher confidence level for the estimations generated by the forecasting system.
4.2
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temporally during the holiday period only. Such clustering is based on pattern analysis and cannot be found by conventional clustering methods.
C-B4 technology can provide a full understanding of the impact of a particular promotion (in addition to known aggregated data such as average demand). This allows us to group products and services in a very accurate way. Since C-B4 deals with patterns of data and can correlate data such as time, date, place, coupon-related purchase, and many more KPIs, and since the C-B4 models detect both time-domain and spacedomain correlations, clustering the appropriate products and services can be done to provide a competitive advantage. External influences to demand patterns, such as promotions and new product introductions, are also managed effectively within the system with the minimum of human input. Context-based clustering is applicable in the following areas:
Global planning helps manage stocks in complex multi-echelon supply chains with
multiple stock locations and suppliers in the most effective and optimal way. Global planning assists in the decision-making process of where stocks should be held in the supply chain. Stock allocation and stock re-distribution proposals become more accurate.
Strategic modeling enables 'what-if' analysis to help with modeling various logistics
scenarios, including the impact of changes to planning strategies, product segmentation, alternative suppliers, etc. Any new strategies that may have an impact on stock investments or client service levels can be simulated and the results can be analyzed prior to implementation. The "real-life" pattern recognition of a group of services and products gives strategic issues a more reliable confidence level.
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4.3
In-advance detection for corrective and preventive action. Since C-B4 detects
abnormalities even when all values are within control limits, one may react even before a phenomenon has reached its peak, and thus reduce the impact of noneffective cannibalization, or enhance effects such as complementary products.
4.4
Applying a central "war room" for a retail networkdealing with on-time corrections for
the production rate, transportation needs, levels of inventory, suggested promotions, and marketing steps.
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5.
Summary
The following C-B4 features and benefits can boost business intelligence efforts:
No need for preliminary knowledgeC-B4s solution does not require any a-priori
knowledge or assumptions about the system or the process distribution or dynamics. The C-B4 modeling data structure is generic and can automatically represent a wide range of both simple and complex processes.
5.1
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6.
Contact Details
For further information, please contact: Email: singerg@c-b4.com or support@c-b4.com Phone: +(972)54-324-7220 Cellular: +(972)54-495-4465 Fax: +(972)9-955-2784 Website: www.c-b4.com
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